Exhibit Index on Page 5
As filed with the Securities and Exchange Commission on September 11, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 28, 1998
EQUIVEST FINANCE, INC.
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(Exact name of registrant as specified in its charter)
Florida 0-18201 59-2346270
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(State or other jurisdiction Commission (I.R.S. Employer
of incorporation) File Number Identification Number)
2 Clinton Square, Syracuse, New York 13202
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(315) 422-9088
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(Registrant's telephone number, including area code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
Page 1
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Item 1. Not Applicable.
Item 2. Acquisition or Disposition of Assets
On August 28, 1998, Equivest Finance, Inc. ("Equivest")
completed a merger between its wholly owned subsidiary, ERC Acquisition
Corp., and Eastern Resorts Corporation ("ERC") of Newport, Rhode
Island, one of the largest developers of timeshare resorts in New
England. As a result of the merger, ERC became a Delaware corporation
and a wholly owned subsidiary of Equivest. Pursuant to a merger
agreement dated as of July 17, 1998, R. Perry Harris and Karen
Harris, the two stockholders of ERC, exchanged all of the outstanding
common stock of ERC for $15 million in cash and 3.2 million shares of
the common stock of Equivest. Consummation of the merger was not
subject to Hart-Scott-Rodino clearance or approval of the stockholders
of Equivest.
ERC was founded by Mr. Harris in 1981. It developed, and
continues to manage, six vacation resorts in Newport, Rhode Island, with
an seventh resort currently under construction in Western Massachusetts.
ERC sells and finances timeshare interests in individual vacation units
for the properties under its management. Mr. Harris will continue to
serve as Chief Executive Officer of ERC under a long-term employment
contract. He will also join the Board of Directors of Equivest. A
stockholders' agreement signed upon the closing of the merger agreement
granted Mr. and Mrs. Harris certain registration rights with respect to
the Equivest shares they acquired in the sale of ERC, and prevents them
from selling any shares in Equivest without Equivest's consent prior to
August 24, 1999, except in connection with any public offering made by
the Company or its other shareholders.
Equivest financed the cash portion of the purchase price for ERC
primarily through a short term bridge loan from Credit Suisse First
Boston Mortgage Capital LLC ("CSFB"). The bridge loan made available up
to $15 million, of which Equivest borrowed approximately $12.2 million.
CSFB received as part of its consideration for extending the loan a
warrant exercisable for 180,000 shares of the common stock of Equivest
at a price of $8.00 per share. CSFB has registration rights with respect
to the shares it purchases under the warrant, if any. In addition, CSFB
provided Eastern Resorts Company, LLC ("Eastern Resorts LLC"), the
primary operating subsidiary of ERC, with a loan of up to $11.5 million,
which Eastern Resorts LLC used to repay two loans in that aggregate
amount made to it by Equivest's primary operating subsidiary, Resort
Funding, Inc., in connection with the financing of an expansion of ERC's
Long Wharf Resort.
Item 3-6. Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) The required financial statements will be filed on Form 8-K/A
or otherwise as soon as practicable, but in any event within
60 days after the required filing date of this Current Report
on Form 8-K.
(b) The required pro forma financial information will be filed on
Form 8-K/A or otherwise as soon as practicable, but in any
event within 60 days after the required filing date of this
Current Report on Form 8-K.
Page 2
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Exhibit No. Exhibit
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10.1 Agreement and Plan of Merger dated as of July 17, 1998 by
and among Equivest, ERC Acquisition Corp. and Eastern
Resorts Corporation.*
10.2 Stockholders' Agreement between Equivest and R. Perry
Harris and Karen Harris, dated as of August 24, 1998.
10.3 Employment Agreement dated as of August 24, 1998, between
ERC and R. Perry Harris.
10.4 Loan and Security Agreement by and among Eastern Resorts
LLC, Equivest, ERC and CSFB, dated as of August 25, 1998,
relating to a loan in the amount of $11.5 million.
10.5 Loan and Security Agreement by and among Resort Funding,
Equivest, Eastern Resorts LLC, ERC and CSFB, dated as of
August 25, 1998, relating to a loan in the amount of $15
million.
10.6 Warrant Agreement dated July 17, 1998, entitling CSFB to
purchase 180,000 shares of the Common Stock of Equivest.
10.7 Registration Rights Agreement dated as of the 17th day of
July, 1998, by and between Equivest and CSFB.
10.8 Amended and Restated Warrant Agreement dated as of
November 14, 1997, entitling CSFB to purchase 250,000
shares of the Common Stock of Equivest.
10.9 Registration Rights Agreement dated as of the 14th day of
November, 1997, by and between Equivest and CSFB.
21.1 List of Subsidiaries of Equivest.
99.1 Press Release, dated August 28, 1998, of Equivest.
Items 8-9. Not Applicable.
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* Not filed herewith; previously filed as Exhibit 10.1 to Equivest's quarterly
report on Form 10-Q, filed with the Securities and Exchange Commission on
August 14, 1998.
Page 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
EQUIVEST FINANCE, INC.
(Registrant)
Date: September 11, 1998 By: /s/ Gerald L. Klaben, Jr.
----------------------------------
GERALD L. KLABEN, JR.
Executive Vice President
and Chief Financial Officer
Page 4
<PAGE>
INDEX TO EXHIBITS
Exhibit No: Exhibit
10.1 Agreement and Plan of Merger dated as of July 17, 1998 by
and among Equivest, ERC Acquisition Corp. and Eastern
Resorts Corporation (incorporated herein by reference to
the Company's Form 10-Q, as filed with the Securities and
Exchange Commision on August 14, 1998).
10.2 Stockholders' Agreement between Equivest Finance, Inc. and
R. Perry Harris and Karen Harris, dated as of August 24,
1998.
10.3 Employment Agreement dated as of August 24, 1998, between
ERC and R. Perry Harris.
10.4 Loan and Security Agreement by and among Eastern Resorts
LLC, Equivest, ERC and CSFB, dated as of August 25, 1998,
relating to a loan in the amount of $11.5 million.
10.5 Loan and Security Agreement by and among Resort Funding,
Equivest, Eastern Resorts LLC, ERC and CSFB, dated as of
August 25, 1998, relating to a loan in the amount of $15
million
10.6 Warrant Agreement dated July 17, 1998, entitling CSFB to
purchase 180,000 shares of the Common Stock of Equivest.
10.7 Registration Rights Agreement dated as of the 17th day of
July, 1998, by and between Equivest and CSFB.
10.8 Amended and Restated Warrant Agreement dated as of
November 14, 1997, entitling CSFB to purchase 250,000
shares of the Common Stock of Equivest.
10.9 Registration Rights Agreement dated as of the 14th day of
November, 1997, by and between Equivest and CSFB.
21.1 List of Subsidiaries of Equivest.
99.1 Press Release, dated August 28, 1998, of Equivest.
Page 5
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is made as of
July 17, 1998 by and among Equivest Finance, Inc., a Florida corporation
("Purchaser"), ERC Acquisition Corp., a Delaware corporation ("Acquisition
Corp."), and Eastern Resorts Corporation, a Rhode Island corporation ("ERC").
W I T N E S S E T H:
WHEREAS, R. Perry Harris and Karen Harris (the "ERC
Shareholders") own all of the issued and outstanding stock of ERC; and
WHEREAS, ERC is the sole member and the sole manager of
Eastern Resorts Company, LLC, a Rhode Island limited liability company (the
"LLC"), which develops, owns and operates timesharing resorts in Rhode Island
and Massachusetts; and
WHEREAS, Purchaser desires to acquire ERC and has formed
Acquisition Corp. for the sole and express purpose of completing such
acquisition; and
WHEREAS, the Board of Directors of ERC (i) has determined that
the merger of ERC with and into Acquisition Corp. (the "Merger") is fair to and
in the best interests of ERC and the ERC Shareholders and has approved this
Agreement and the Merger and (ii) has recommended the approval of this Agreement
and the Merger by the ERC Shareholders;
WHEREAS, the ERC Shareholders have approved this Agreement and
the Merger;
WHEREAS, the Board of Directors of Purchaser has determined
that the Merger is fair to and in the best interests of Purchaser and its
shareholders and has approved this Agreement and the Merger;
WHEREAS, the Board of Directors of Acquisition Corp. (i) has
determined that the Merger is fair to and in the best interests of Acquisition
Corp. and its shareholder and has approved this Agreement and the Merger and
(ii) has recommended the approval of this Agreement and the Merger by the
shareholder of Acquisition Corp., and Purchaser, as sole shareholder of
Acquisition Corp., has approved this Agreement and the Merger;
WHEREAS, the Merger will be consummated upon the terms and
subject to the conditions of this Agreement and in accordance with the Delaware
General Corporation Law (the "DGCL") and the Rhode Island Business Corporation
Act (the "RBCA"); and
WHEREAS, for federal (and applicable state and local) income
tax purposes, it is intended that the Merger shall qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, the parties hereto, intending
legally to be bound, hereby agree as follows:
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2
ARTICLE I
TERMS OF MERGER
SECTION 1.1 MERGER.
Purchaser, Acquisition Corp. and ERC acknowledge and agree
that their representations, covenants, warranties, agreements, indemnities and
other undertakings contained in this Agreement are made and given to induce the
other parties to enter into this Agreement and to consummate the Merger and that
each party in reliance thereon has agreed to execute this Agreement and
consummate the Merger. Subject to the satisfaction or waiver of the conditions
set forth in this Agreement, at the Closing (as defined in Section 1.2),
pursuant to the terms and provisions of this Agreement and all relevant laws,
ERC shall be merged with and into Acquisition Corp. As a result of the Merger,
the separate corporate existence of ERC shall cease and Acquisition Corp. shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation").
SECTION 1.2 TIME AND PLACE OF CLOSING.
As promptly as practicable and in no event later than the
fifth business day following the satisfaction or waiver of the conditions
specified in Article VI (other than conditions which, by their nature, are to be
satisfied at the Closing, but subject to those conditions), the closing of the
Merger (the "Closing") shall take place at the offices of Shearman & Sterling,
599 Lexington Avenue, New York, N.Y. 10022. At the Closing, there shall be
delivered to Purchaser and the ERC Shareholders the consideration, certificates
and other documents and instruments required to be delivered under Articles VI
and VII. The parties shall prepare, execute and file a certificate of merger and
articles of merger and any other related documents in order to comply in
effecting the Merger in all respects with the respective requirements of the
DGCL and the RBCA. Upon filing of the articles of merger with the Secretary of
State of the State of Rhode Island and a certificate of merger with the
Secretary of State of the State of Delaware, the Merger shall become effective
(the time of such effectiveness being referred to as the "Effective Time").
SECTION 1.3 EFFECTS OF MERGER.
At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the DGCL and the RBCA. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of ERC and Acquisition
Corp. shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of each of ERC and
Acquisition Corp. shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 1.4 CONVERSION OF SECURITIES. (a) At the Effective Time, by virtue
of the Merger and without any action on the part of Acquisition Corp., ERC or
the ERC Shareholders:
(i) each issued and outstanding share (each a "Share" and,
collectively, the "Shares"), of common stock, no par value per share,
of ERC ("ERC Common Stock") issued and outstanding immediately prior to
the Effective Time (other than any Shares to be canceled pursuant to
Section 1.4(a)(ii)) shall be converted into the right to receive (A)
$1,500 (the "Per Share Cash Amount") plus (B) 320 shares (the "Per
Share Stock Amount" and, together with the Per Share Cash Amount, the
"Merger Consideration") of common stock, $.05 par value per share, of
Purchaser ("Purchaser Common Stock"); provided, however, that if,
between the date of this Agreement and the Effective Time, the
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3
Purchaser Common Stock or the ERC Common Stock shall have been
reclassified for any reason (other than pursuant to any action
described in Schedule 2.4 hereto) including, without limitation, any
reclassification, recapitalization, split, stock dividend, combination
or exchange of shares, the Per Share Cash Amount and the Per Share
Stock Amount shall be equitably adjusted to reflect such change; and
(ii) each Share held in the treasury of ERC and each Share
owned by Purchaser or any direct or indirect wholly owned subsidiary of
Purchaser or ERC immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof, and no
payment shall be made with respect thereto.
SECTION 1.5 EXCHANGE OF CERTIFICATES.
(a) Exchange Procedures. At the Closing, each ERC Shareholder
shall surrender to Purchaser for cancellation a certificate or certificates
representing the Shares held by such holder (collectively, the "Certificates"),
duly endorsed in blank, or with appropriate stock powers, duly executed in
blank, attached thereto, in proper form for transfer, and with all applicable
taxes, if any, paid or provided for. At the Closing, Purchaser shall deliver to
such ERC Shareholder, in exchange for the surrendered Certificates, (i) cash (by
wire transfer) in an amount equal to the number of Shares to be exchanged by
such holder pursuant to Section 1.4(a) multiplied by the Per Share Cash Amount
and (ii) a certificate representing that number of shares of Purchaser Common
Stock that such holder shall have the right to receive in respect of the Shares
formerly represented by such Certificate or Certificates (after taking into
account all Shares then held by such holder), and the Certificate or
Certificates so surrendered shall forthwith be canceled.
(b) No Further Rights in Shares. All Merger Consideration
transferred to the ERC Shareholders upon conversion of the Shares in accordance
with the terms hereof (including any cash paid pursuant to Section 1.5(c)) shall
be deemed to have been issued in full satisfaction of all rights pertaining to
such Shares.
(c) No Fractional Shares. No certificates or scrip
representing fractional shares of Purchaser Common Stock shall be issued upon
the surrender for exchange of Certificates. Each holder of a fractional share
interest shall be paid an amount in cash equal to the product obtained by
multiplying (i) such fractional share interest to which such holder (after
taking into account all fractional share interests then held by such holder)
would otherwise be entitled by (ii) the Exchange Price. As used herein, the
"Exchange Price" means an amount equal to the average of the per share closing
prices, as reported by NASDAQ SmallCap Market, of shares of Purchaser Common
Stock for the 20 consecutive trading days ending on (and including) the trading
day immediately preceding the Effective Time.
(d) Withholding Rights. Purchaser shall be entitled to deduct
and withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to the ERC Shareholders such amounts, if any, as it is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law. However, if Purchaser will
in fact have an obligation to deduct and withhold from the Merger Consideration,
then to the extent such obligation can be avoided or minimized by either (i) the
ERC Shareholders' compliance with any applicable certification requirement or
other exemption or (ii) Purchaser's compliance with any applicable certification
requirement or other exemption, or by both (i) and (ii), each party agrees to
individually undertake such action or actions prior to the Closing as will be
necessary to so comply with any such certification requirement or other
exemption that is available to it (and, to the extent reasonably necessary, to
assist the other party in so complying with any certification requirement or
other exemption that is available to such other party). To the extent that
amounts are so
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4
deducted and withheld from the Merger Consideration by Purchaser, (i) such
deducted and withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the ERC Shareholders in respect of which such
deduction and withholding was made by Purchaser and (ii) such deducted and
withheld amounts shall be paid by Purchaser to the appropriate governmental
bodies and agencies.
(e) Dividends. Holders of shares of Purchaser Common Stock
issued pursuant to the Merger shall be entitled to any dividends paid with
respect to such shares of Purchaser Common Stock that become payable to persons
who are holders of record of Purchaser Common Stock as of any record date
following the Effective Time.
SECTION 1.6 STOCK TRANSFER BOOKS.
At the Effective Time, the stock transfer books of ERC shall
be closed and there shall be no further registration of transfers of Shares
thereafter on the records of ERC. From and after the Effective Time, the holders
of Certificates representing Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided herein or by applicable law. On or after the
Effective Time, any Certificates presented to Purchaser for any reason shall be
converted into Merger Consideration and any cash in lieu of fractional shares of
Purchaser Common Stock to which the holders thereof are entitled pursuant to
Section 1.5(c).
SECTION 1.7 METHOD OF CARRYING MERGER INTO EFFECT.
Purchaser, Acquisition Corp. and ERC shall cooperate in all
reasonable respects in effecting the Merger, including, without limitation,
taking, or causing to be taken, such actions as may be required in order to
cause the Merger to become effective, subject to and in accordance with the
provisions hereof.
SECTION 1.8 CHARTER, BY-LAWS AND BOARD OF DIRECTORS OF THE SURVIVING
CORPORATION.
At the Effective Time: (a) the Certificate of Incorporation
and By-Laws of Acquisition Corp., as the Surviving Corporation in the Merger, as
in effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation; provided, however, that,
at the Effective Time, Article I of the Certificate of Incorporation of the
Surviving Corporation shall read as follows: "The name of the Corporation is
Eastern Resorts Corporation" and (b) the directors of Acquisition Corp.
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of ERC
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
SECTION 1.9 TAX-FREE REORGANIZATION.
(a) The parties intend that (i) the Merger shall qualify as a
reorganization pursuant to Section 368(a) of the Code, (ii) the ERC Shareholders
shall recognize no gain or loss and shall take into account no income as a
result of the Merger (except for gain recognition with respect to the cash
portion of the Merger Consideration received by the ERC Shareholders), (iii) the
tax basis of ERC's assets that are directly transferred to Acquisition Corp. by
ERC in exchange for the Merger Consideration, as well as the tax basis of the
LLC's assets that are indirectly transferred by ERC to Acquisition Corp. as a
result of the Merger shall remain unchanged by reason of the Merger, and (iv)
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5
any elections made by ERC or the LLC with respect to periods ending on or prior
to the date of the Effective Time to account for the sale of certain timeshare
units (as set forth in Schedule 3.17 hereto) on an installment basis shall be in
effect and be similarly accounted for by the Purchaser Group (as defined in
Section 4.5(a)) after the date of the Effective Time. Each party shall report
the transactions contemplated by this Agreement to the Internal Revenue Service
and other taxing authorities in a manner consistent with this Section 1.9, and
no party will take or fail to take (or permit any of its subsidiaries or
affiliates to take or fail to take) any action or position if the taking of such
action or position or the failure to take such action or position, as the case
may be, would be inconsistent with or would jeopardize such treatment, unless
and until such party is required pursuant to a Final Determination (as defined
below) under applicable law to report the transaction in another manner. The
parties do not intend that the transfer of the equity interests in ERC Ventures,
Inc. by R. Perry Harris on or prior to the Closing shall constitute a
transaction contemplated or otherwise governed by this Agreement.
(b) If, pursuant to a Final Determination (as defined below),
the ERC Shareholders are required to report the transactions contemplated by
this Agreement or the income associated with the sale of certain timeshare units
described in Section 1.9(a)(iv), or both, in a manner inconsistent with Section
1.9(a), Purchaser agrees to use its reasonable efforts to cause the members of
the Purchaser Group (as defined in Section 4.5(a)) to revise their reporting of
the transactions or the sale of certain timeshare units as contemplated by this
Agreement (including, but not limited to, by the filing of an amended return or
claim for a refund of Taxes (as such term is defined in Section 3.17); provided
that Purchaser shall have no obligation to take any action that it concludes
would have an adverse effect on the Purchaser Group.
(c) For purposes of this Agreement, "Final Determination"
shall mean the final resolution of liability for any Tax for a taxable period,
including any related interest or penalties, (i) by Internal Revenue Service
Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance
by or on behalf of the Internal Revenue Service (the "IRS"), or by a comparable
form under the laws of other jurisdictions; except that a Form 870 or 870-AD or
comparable form that reserves (whether by its terms or by operation of law) the
right of the taxpayer to file a claim for refund and/or the right of a taxing
authority to assert a further deficiency with respect to an item or items shall
not constitute a Final Determination with respect to such item or items; (ii) by
a decision, judgment, decree, or other order by a court of competent
jurisdiction, which has become final and unappealable; (iii) by a closing
agreement or accepted offer in compromise under Section 7121 or 7122 of the
Code, or comparable agreements under the laws of other jurisdictions; (iv) by
any allowance of a refund or credit in respect of an overpayment of Tax, but
only after the expiration of all periods during which such refund may be
recovered (including by way of offset) by a taxing authority; or (v) by any
other final disposition, including by reason of the expiration of the applicable
statute of limitations.
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6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to ERC and the ERC
Shareholders as follows:
SECTION 2.1 ORGANIZATION.
Each of Purchaser and Acquisition Corp. is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, is duly qualified and in good standing as a foreign
corporation in the jurisdictions where the ownership of its assets or the
conduct of its business requires such qualification (except where the failure to
so qualify would not have a Purchaser Material Adverse Effect), and has full
power and authority to own its properties and assets and to carry on lawfully
its business as currently conducted. Purchaser owns all of the stock of, and
controls all of the voting power of, Acquisition Corp. The term "Purchaser
Material Adverse Effect" means any change in or effect on the business of
Purchaser and its subsidiaries that, individually or together with all other
related adverse changes and effects, is reasonably likely to be materially
adverse to the business, results of operations, properties or financial
condition of Purchaser and its subsidiaries taken as a whole.
SECTION 2.2 ARTICLES OF INCORPORATION, BYLAWS AND AGREEMENTS.
A true, complete and correct copy of the Articles of
Incorporation and By-Laws of Purchaser and the Certificate of Incorporation and
By-Laws of Acquisition Corp. as currently in effect have been delivered to ERC.
There are no agreements by and between or among Purchaser, Acquisition Corp. and
any or all of their respective shareholders imposing any restrictions upon the
transfer of or otherwise pertaining to the Purchaser Common Stock to be received
by the ERC Shareholders or the ownership thereof.
SECTION 2.3 AUTHORIZATION.
Each of Purchaser and Acquisition Corp. has full legal right,
power and authority to enter into this Agreement and consummate the Merger. The
execution, delivery and performance by Purchaser and Acquisition Corp. of this
Agreement and the Related Agreements (as defined in Section 7.1(g)) and the
actions contemplated hereby and thereby have been duly and validly authorized by
all necessary corporate action, and this Agreement and (upon their execution)
each of the Related Agreements constitute or will constitute valid and binding
obligations of Purchaser or Acquisition Corp., as applicable, enforceable
against it in accordance with their terms.
SECTION 2.4 CAPITAL STRUCTURE.
(a) Since March 31, 1998 (except as disclosed in the SEC
Documents (as defined in Section 2.5) filed prior to the date hereof or as set
forth on Schedule 2.4 hereto), there has been no change in the authorized and
outstanding equity securities and rights to acquire equity securities of
Purchaser.
(b) Since March 31, 1998, Purchaser has not taken any action
prohibited by Section 4.1(c) of this Agreement.
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SECTION 2.5 SEC DOCUMENTS; FINANCIAL STATEMENTS.
(a) Except as set forth on Schedule 2.5(a) hereto, Purchaser
has filed all required reports, forms and documents required to be filed by it
with the Securities and Exchange Commission (the "SEC") since June 30, 1996 (the
"SEC Documents"). All of the SEC Documents (i) were prepared in accordance with
the applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, (ii) did not, at the time they were filed, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except to
the extent such statements have been modified or superseded by subsequent SEC
Documents filed prior to the date hereof.
(b) Except as set forth on Schedule 2.5(b) hereto, the
consolidated financial statements of Purchaser included in the SEC Documents
have been prepared in accordance with generally accepted accounting principles
("GAAP") (except, in the case of interim financial statements, as permitted by
the applicable forms of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto), fairly
presented, in all material respects, the consolidated financial position of
Purchaser and its subsidiaries, taken as a whole, as of the dates thereof and
the consolidated results of operations and cash flows for the periods then ended
(subject, in the case of interim financial statements, to normal year-end
adjustments) and include all adjustments (consisting only of normal recurring
accruals) that are necessary for a fair presentation of the consolidated
financial condition of Purchaser and its subsidiaries and the results of
operations and cash flows of Purchaser and its subsidiaries as of the dates
thereof or for the periods covered thereby.
SECTION 2.6 PURCHASER COMMON STOCK.
The shares of Purchaser Common Stock to be issued in the
Merger have been duly authorized by all necessary corporate action on the part
of Purchaser and, upon issuance to the ERC Shareholders in accordance with this
Agreement, will be validly issued, fully paid and non-assessable and not subject
to preemptive rights.
SECTION 2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth on schedule 2.7 hereto or disclosed in the
SEC Documents filed prior to the date hereof, since the date of the most recent
financial statements included in the SEC Documents filed prior to the date
hereof, there has not been any change in or effect on the business of Purchaser
and its subsidiaries that, individually or together with all other adverse
changes and effects, is reasonably likely to be materially adverse to the
business, results of operations, properties or financial condition of Purchaser
and its subsidiaries taken as a whole.
SECTION 2.8 NONCONTRAVENTION; REQUIRED CONSENTS.
(a) Except as described in Schedule 2.8 hereto, the execution
and delivery of this Agreement and the Related Agreements by Purchaser, the
consummation by Purchaser of the Merger and compliance by Purchaser with the
provisions of this Agreement and the Related Agreements will not conflict with,
or result in any violation of, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under, or result in the creation of any lien upon any of the properties
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8
or assets of Purchaser or any of its subsidiaries under, (i) the Articles of
Incorporation or By-Laws of Purchaser or the comparable charter or
organizational documents or limited liability or partnership or similar
agreement (as the case may be) of any such subsidiary, (ii) any material loan or
credit agreement, note, bond, mortgage, indenture, reciprocal easement
agreement, lease or other agreement, instrument, permit, concession, franchise
or license of Purchaser or any of its subsidiaries or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Purchaser or
any of its subsidiaries or their respective properties or assets, other than, in
the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or liens that individually or in the aggregate would not (x) constitute a
Purchaser Material Adverse Effect or (y) prevent the consummation of the Merger.
(b) The execution and delivery of this Agreement by Purchaser
does not, and the performance of this Agreement by Purchaser will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign
("Governmental Entity"), except (i) for applicable requirements, if any, of the
Exchange Act, state securities or "blue sky" laws ("Blue Sky Laws"), the
National Association of Securities Dealers, Inc. (the "NASD"), and state
takeover laws, and filing and recordation of appropriate merger documents as
required by the DGCL and the RBCA, and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger or
otherwise prevent Purchaser from performing its obligations under this
Agreement, and would not constitute a Purchaser Material Adverse Effect.
SECTION 2.9 LIABILITIES.
There are no material liabilities of Purchaser or its
subsidiaries, except (i) as set forth in Schedule 2.9(a) hereto, (ii) as and to
the extent reflected or reserved against in the financial statements of
Purchaser, or (iii) incurred since the date of this Agreement in the ordinary
course of business, consistent with past practice of Purchaser and its
subsidiaries, and which do not and are not reasonably likely to have a Purchaser
Material Adverse Effect. For purposes of this Section 2.9 only, "material" means
in excess of $25,000 individually or $100,000 in the aggregate. Except as set
forth on Schedule 2.9(b) hereto, reserves are reflected on the financial
statements of Purchaser and its subsidiaries against all liabilities of
Purchaser and its subsidiaries in amounts that have been established on a basis
consistent with past practices of Purchaser and its subsidiaries and in
accordance with GAAP.
SECTION 2.10 CONTRACTS.
Except as set forth in Schedule 2.10 hereto, neither Purchaser
nor any of its subsidiaries is in material breach of any provisions of, or is in
material violation or default under the terms of, any material contract (except
for such defaults which individually or, in the aggregate, would not constitute
a Purchaser Material Adverse Effect).
SECTION 2.11 LITIGATION AND COMPLIANCE.
Except as set forth in Schedule 2.11 hereto and except as set
forth in the SEC Documents filed prior to the date hereof, there is no
litigation, suit, claim, action, arbitration, administrative proceeding, or, to
the knowledge of Purchaser, investigation of Purchaser or any of its
subsidiaries or the operation of any of their businesses pending before any
court, arbitrator, administrative agency or other governmental authority or, to
the knowledge of Purchaser, threatened against Purchaser or any of its
subsidiaries, by or before any court, arbitrator, administrative agency or other
governmental authority, that is not adequately covered by available insurance
(subject to normal deductibles). There are no pending or threatened collective
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9
strikes, controversies, slowdowns, work stoppages or other labor disturbances
between the Company and its employees. Except as otherwise set forth in this
Agreement and except where such non-compliance that would not have a Purchaser
Material Adverse Effect, Purchaser and its subsidiaries are in compliance in all
material respects with all federal, state and local laws and regulations and
administrative orders (collectively, "Laws") and there is no order, writ,
injunction or decree of any court, arbitrator, administrative agency or other
governmental authority materially affecting the operations or the business of
Purchaser or any of its subsidiaries or prohibiting the consummation of the
Merger.
SECTION 2.12 CONSOLIDATED TAX LIABILITY.
Neither Purchaser nor any of its subsidiaries has or could
have any liability for any Taxes (as defined in Section 3.17) pursuant to
Treasury Regulation ss. 1.1502-6, (or comparable provisions of state, local or
foreign tax law), or otherwise with respect to Bennett Funding Group, Inc. or
Bennett Management and Development Corporation) that would result in a Purchaser
Material Adverse Effect. Set forth in Schedule 2.12 hereto is a list of those
taxable years for which the Purchaser and its subsidiaries could potentially be
liable under Treasury Regulation ss.1.1502-6 or otherwise for Taxes attributable
to the Bennett Funding Group, Inc. or Bennett Management and Development
Corporation.
SECTION 2.13 KNOWLEDGE OF PURCHASER.
For purposes of this Article II, "knowledge" means with
respect to Purchaser, the actual knowledge of the persons listed in Schedule
2.13 hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ERC AND THE ERC SHAREHOLDERS
ERC and each ERC Shareholder does hereby represent and warrant
to Purchaser as follows:
SECTION 3.1 ORGANIZATION.
(a) Each of ERC and the LLC has been duly organized as a
corporation or limited liability company, as appropriate, and is validly
existing and in good standing under the laws of the State of Rhode Island and is
duly qualified and in good standing as a foreign corporation in the states set
forth in Schedule 3.1(a) hereto (which list of states includes all states in
which the ownership of its assets or the nature of its business, including the
advertising, soliciting or consummating the sale of Intervals (as defined in
Section 3.6(a)), requires such qualification), except where the failure to so
qualify would not have an ERC Material Adverse Effect. The term "ERC Material
Adverse Effect" means any change in or effect on the business of ERC, the LLC or
any Subsidiary (as defined below) that, individually or together with all other
related adverse changes and effects, is reasonably likely to be materially
adverse to the business, properties, results of operations or financial
condition of ERC, the LLC and the Subsidiaries taken as a whole. Except as set
forth on Schedule 3.1(a), neither ERC nor the LLC (i) owns, directly or
indirectly, the stock of any corporation, (ii) is a partner in any partnership
or (iii) is an equity owner in any limited liability company or other entity
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10
(excluding the Associations (as defined in subsection (b) of this Section 3.1)).
Each Subsidiary is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and is qualified to do business and in good standing in all jurisdictions where
such qualification is necessary to carry on its business as now conducted,
except where the failure to so qualify would not have an ERC Material Adverse
Effect. Each of ERC, the LLC and each Subsidiary has full power and authority to
own its properties and assets and to carry on lawfully its business as currently
conducted in all material respects in the states set forth in Schedule 3.1(a)
hereto.
(b) Except as set forth in Schedule 3.1(b) hereto, there are
no condominium, timeshare or other homeowner associations (each, an
"Association" and, collectively, the "Associations") for any of the Resorts (as
defined in Section 3.6(a)). To ERC's knowledge, each Association is organized
and validly existing under the laws of the state of Massachusetts or Rhode
Island, and is duly qualified and in good standing, with full power and
authority to own its properties and assets and to carry on lawfully its business
as currently conducted in all material respects.
SECTION 3.2 ARTICLES OF INCORPORATION, BYLAWS AND AGREEMENTS.
A true, complete and correct copy of the articles of
incorporation, by-laws, limited liability company certificate, operating
agreement or other organizational documents of ERC, the LLC, each Subsidiary and
each Association, together with all amendments thereto, have been delivered to
Purchaser, as set forth on Schedule 3.2 hereto. There are no agreements by and
between or among ERC, the LLC or any Subsidiary imposing any restrictions upon
the transfer of or otherwise pertaining to the securities of ERC, the LLC or any
Subsidiary (including but not limited to the ERC Stock and the LLC membership
interests).
SECTION 3.3 CAPITAL STRUCTURE AND OWNERSHIP.
Each of ERC, the LLC and each Subsidiary has authorized,
issued and outstanding the number of shares of stock or other securities so
indicated on Schedule 3.3 hereto. All such outstanding securities have been duly
and validly issued, are fully paid and nonassessable, are owned, free and clear
of all encumbrances, by the ERC Shareholders and have not been issued in
violation of (a) any preemptive rights of any person or (b) applicable federal
or state securities laws. No shares of any other class of capital stock or
security of ERC, the LLC or any Subsidiary are outstanding. There are no
outstanding options, warrants or other rights to acquire securities of ERC, the
LLC or any Subsidiary, nor are there securities outstanding which are
convertible into securities of ERC, the LLC or any Subsidiary. The name and
residence address of each of the ERC Shareholders, and the holder of the
securities of the LLC and each Subsidiary and the respective number and
description of outstanding securities held by each holder are set forth on
Schedule 3.3 hereto.
SECTION 3.4 AUTHORIZATION.
(a) ERC and (to the extent they are parties thereto), the ERC
Shareholders, have full legal right, capacity, power and authority to enter into
this Agreement and each Related Agreement and to consummate the Merger. The
execution, delivery and performance by ERC of this Agreement and the Related
Agreements and the actions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action, and this Agreement and
(upon their execution) each of the Related Agreements constitute or will
constitute valid and binding obligations of ERC and (to the extent they are
<PAGE>
11
parties hereto), the ERC Shareholders, enforceable against such persons in
accordance with their terms. Moreover, this Agreement has been approved by the
ERC Shareholders pursuant to a unanimous consent resolution, a copy of which is
attached hereto as Schedule 3.4.
(b) The ERC Shareholders hereby agree not to revoke such
unanimous written consent and not to take any other action to prevent the
consummation of the Merger, including, without limitation, transferring any
Shares held by the ERC Shareholders to any other person or granting any proxy,
lien or other rights to any person in respect of such Shares. The ERC
Shareholders also agree to vote their Shares against any business combination
transaction, recapitalization or other transaction which could result in any of
the conditions to the consummation of the Merger not being fulfilled.
SECTION 3.5 FINANCIAL STATEMENTS AND ABSENCE OF CHANGES.
(a) True and complete copies of (i) the audited consolidated
balance sheet of ERC for each of the three fiscal years ended as of December 31,
1995, December 31, 1996, and December 31, 1997, and the related audited
consolidated statements of income, retained earnings, stockholders' equity and
changes in financial position of ERC, together with all related notes and
schedules thereto, accompanied by the reports thereon of Donovan, Sullivan &
Ryan (collectively referred to herein as the "Financial Statements") and (ii)
the unaudited consolidated balance sheet of ERC as of May 31, 1998, and the
related consolidated statements of income of ERC for the five months ended May
31, 1998, together with all related notes and schedules thereto (collectively
referred to herein as the "Interim Financial Statements") have been delivered by
ERC to Purchaser. The Financial Statements and the Interim Financial Statements
(i) present fairly in all material respects the consolidated financial
condition, results of operations, and cash flows of ERC, the LLC and the
Subsidiaries as of the dates thereof or for the periods covered thereby, (ii)
were prepared in accordance with GAAP applied on a basis consistent with the
past practices of ERC, (iii) were prepared in accordance with the books of
account and other financial records of ERC, and (iv) include all adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
presentation of the consolidated financial condition of ERC and the Subsidiaries
and the results of the operations, and cash flows of ERC and the Subsidiaries as
of the dates thereof or for the periods covered thereby.
(b) The books of account and other financial records of ERC,
the LLC and the Subsidiaries: (i) reflect all items of income and expense and
all assets and liabilities required to be reflected therein in accordance with
GAAP applied on a basis consistent with the past practices of ERC, the LLC and
the Subsidiaries, respectively, (ii) are in all material respects complete and
correct, and do not contain or reflect any material inaccuracies or
discrepancies and (iii) have been maintained in accordance with good business
and accounting practices. Except as set forth in Schedule 3.5 hereto, since
December 31, 1997, there has not been any change in or effect on the business of
ERC, the LLC and the Subsidiaries that, individually or together with all other
adverse changes and effects, is reasonably likely to be materially adverse to
the business, properties, results of operations or financial condition of ERC,
the LLC and the Subsidiaries taken as a whole.
SECTION 3.6 TITLE TO AND CONDITION OF ASSETS AND PROPERTY.
(a) As of the date hereof, Schedule 3.6(a) hereto sets forth
(i) a list of each of the condominium or timesharing resorts, properties under
<PAGE>
12
development and undeveloped real property holdings or interests therein
(collectively, the "Resorts") in which ERC, the LLC or any Subsidiary directly
or indirectly owns real property, (ii) a description of all real property which
comprises the Resorts (the "Real Property" or "Real Properties") (which
description includes a description of all land comprising the Resorts (the
"Land"), a description of all condominium, undivided interests and other
dwelling units which have been constructed on the Land (the "Dwelling Units"),
including all Dwelling Units which have been dedicated to timeshare regimes and
which have not been dedicated to timeshare regimes, as well as a list of all
timeshare interests therein which have not been sold and which are owned by ERC,
the LLC and/or the Subsidiaries as of five business days prior to the date
hereof (the "Unsold Inventory") and (iii) a list of all material real property
leases, material easements, material licenses or similar material possessory
agreements pursuant to which ERC, the LLC and/or any Subsidiary uses or occupies
real property (the "Leases"), true, correct and complete (in all material
respects) copies of which have been delivered to Purchaser. As of the date
hereof, except as set forth on Schedule 3.6(a) hereto, neither ERC nor the LLC
or any Subsidiary owns any interest in any real property or any leasehold
interest therein and has not entered into any agreements to acquire additional
Real Property ("Purchase and Option Agreements"). ERC, the LLC and/or the
Subsidiaries have good title to all Real Property, including Unsold Inventory,
and good title to all other assets reflected in the Financial Statements or
currently owned and used in the operation of their businesses, and such Real
Property and other assets are free and clear of all material liens (except for
liens for Taxes that are (i) not yet due and payable or (ii) being contested in
good faith by proper proceedings, and in each case as to which appropriate
reserves are being maintained), claims, charges, security interests, purchase
options, or other material encumbrances, except for the "Encumbrances" described
on Schedule 3.6(a) hereto or set forth on the title policies (other than general
exceptions) listed on Schedule 3.6(a) hereto attached hereto (which liens,
claims, charges, security interests, purchase options, or other encumbrances set
forth on such title policies (other than general exceptions) or listed on
Schedule 3.6(a) hereto, together with Interval Sales or the creation of interval
ownership or condominium regimes in each case in the ordinary course of business
since the date hereof) are collectively referred to herein as the "Permitted
Exceptions" and such title policies are referred to herein as the "Title
Policies").
(b) Except as set forth on Schedule 3.6(b) hereto, neither
ERC, the LLC nor any of the Subsidiaries has any patents, copyrights, trade
names, trademarks, service marks, other such names or marks or applications
therefor. There are no pending, nor to the knowledge of ERC, threatened claims
of infringement upon the rights to any intellectual property referred to on
Schedule 3.6(b) hereto of others or, except as set forth on Schedule 3.11
hereto, any agreements or undertakings with respect to any such rights.
(c) Except as noted on Schedule 3.6(c) hereto, with respect to
the Leases and the Purchase and Option Agreements, there is no material breach
or event of default on the part of ERC, the LLC or any Subsidiary which would
have an ERC Material Adverse Effect. The Leases and the Purchase and Option
Agreements are in full force an effect and, to the knowledge of ERC, are valid
and enforceable against the parties thereto in accordance with their terms
(subject to bankruptcy, insolvency and other similar laws or equitable
principles relating to, affecting or qualifying the rights of creditors
generally) and all rental and other payments currently due under each of the
Leases and all option and other payments currently due under each of the
Purchase and Option Agreements have been duly paid or are outstanding for fewer
than 30 days.
(d) There is no pending or, to the knowledge of ERC,
threatened condemnation, eminent domain or similar proceeding with respect to
any Real Property.
<PAGE>
13
(e) ERC, the LLC and the Subsidiaries have not granted any
outstanding options or rights of first refusal to purchase or lease any of the
Real Property, or any portion thereof or interest therein, except as noted in
Schedule 3.6(e) hereto.
(f) Prior to Closing, no portion of the Real Property or any
interest of ERC, the LLC or any Subsidiary therein shall be further (after the
date hereof) alienated, encumbered, conveyed or otherwise transferred except for
sales and financing of Intervals in the ordinary course of business and
borrowings on currently existing construction loans. Except as set forth on
Schedule 3.6(a) hereto, there are no agreements (whether or oral or written) to
sell, convey or transfer any Intervals, except sales and financing of Intervals
in the ordinary course of business (i.e., for a price and upon terms which are
in the ordinary course of business of ERC, the LLC and any Subsidiary).
(g) ERC has made available to Purchaser true and complete
copies of each deed for each parcel of Real Property and all the title insurance
policies, title reports, surveys, certificates of occupancy, environmental
reports and audits, appraisals, permits, other title documents and other
documents relating to or otherwise affecting the Real Property in the possession
of ERC, the operations of ERC, the LLC or any Subsidiary thereon or any other
uses thereof. ERC, the LLC or a Subsidiary, as the case may be, is in peaceful
and undisturbed possession of each parcel of Real Property and to the knowledge
of ERC there are no contractual or legal restrictions that preclude or restrict
the ability to use the Real Property for the purposes for which they are
currently being used.
(h) With respect to each of the Leases:
(i) except as otherwise disclosed in Schedule 3.6(h), with
respect to each such lease or sublease: (A) none of ERC, the LLC nor
any Subsidiary has received any notice of cancellation or termination
under such lease or sublease and no lessor has any right of termination
or cancellation under such lease or sublease except as set forth
therein, (B) none of ERC, the LLC nor any Subsidiary has received any
notice of a breach or default under such lease or sublease, which
breach or default has not been cured, and (C) none of ERC, the LLC nor
any Subsidiary has assigned or sublet all or any portion of its
interest under such Leases, except in connection with a collateral
assignment thereof; and
(ii) none of ERC, the LLC, any Subsidiary nor (to the
knowledge of ERC) any other party to such lease or sublease, is in
breach or default in any material respect, and, to the knowledge of
ERC, no event has occurred that, with notice or lapse of time would
constitute such a breach or default or permit termination, modification
or acceleration under such lease or sublease.
(i) All the Real Property is occupied under a current
certificate of occupancy or similar permit, the transactions contemplated by
this Agreement will not require the issuance of any new or amended certificate
of occupancy.
SECTION 3.7 INSURANCE.
Schedule 3.7 hereto sets forth a list of all policies of
insurance which insure the properties, business or liabilities of ERC, the LLC
and each of the Subsidiaries setting forth the types and amounts of coverage.
Each of such policies is current and in full force and effect and neither ERC,
the LLC nor any of the Subsidiaries has received notice of default under, or
notice of intended cancellation or nonrenewal of, any such policies. ERC, the
LLC and each of the Subsidiaries will use their commercially reasonable efforts
to keep all insurance policies listed in Schedule 3.7 in effect through the
Closing.
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14
SECTION 3.8 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, the following terms shall
have the following meanings: (i) "Environmental Law" means any Law now in effect
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the environment, health, safety or natural resources,
including without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials; (ii) "Environmental Permit" means any permit, approval,
identification number, license or other authorization required under any
applicable Environmental Law; (iii) "Hazardous Materials" means (a) petroleum
and petroleum products, by-products or breakdown products, radioactive
materials, asbestos-containing materials and polychlorinated biphenyls and (b)
any other chemicals, materials or substances regulated as toxic or hazardous or
as a pollutant, contaminant or waste under any applicable Environmental Law and
(iv) "Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like
into or upon any land or water or air or otherwise entering into the
environment. Except as noted on Schedule 3.8 hereto and except for violations
which would not have an ERC Material Adverse Effect: (i) each of ERC, the LLC
and each Subsidiary have conducted and are conducting their respective
businesses in substantial compliance with all applicable Environmental Laws and
have all permits, licenses and other approvals and authorizations necessary for
the operation of their respective businesses as presently conducted, (ii) ERC
has not, and (to the knowledge of ERC) no other Person has, Released Hazardous
Materials on any of the Real Property, (iii) neither ERC, the LLC nor any
Subsidiary has received any written notice that it is the subject of any pending
or threatened investigation or inquiry by any governmental authority, or subject
to any remedial obligations under any Environmental Laws, (iv) no Hazardous
Materials have been disposed of, released or transported in violation of any
applicable Environmental Law from any properties owned by ERC, the LLC or any
Subsidiary and (v) neither ERC, the LLC nor any Subsidiary nor any of their
respective properties are subject to any material liabilities relating to any
suit, settlement, court order, administrative order, judgment or claim asserted
or arising under any applicable Environmental Laws.
SECTION 3.9 MINUTE AND STOCK BOOKS; RECORDS.
The respective minute books of ERC, the LLC and each of the
Subsidiaries made available to Purchaser contain accurate records of all
meetings held and reflect all other material corporate or similar actions of the
respective shareholders, directors, partners and members (and committees
thereof). The copies of the corporate charter, bylaws, limited liability company
agreement and certificate which are contained in or kept with said minute books
are true, complete and correct and contain all amendments thereto duly adopted
and in force. The stock transfer ledger maintained by ERC and made available to
Purchaser is complete and accurate. The respective stock or other interests
transfer records maintained by LLC and each of the Subsidiaries and made
available to Purchaser are complete and accurately disclose all issuances and
transfers of stock or other interest of the LLC and each of the Subsidiaries.
<PAGE>
15
SECTION 3.10 LIABILITIES.
There are no material liabilities of ERC, the LLC or the
Subsidiaries, except (a) as set forth on Schedule 3.10(a) hereto, (b) as and to
the extent reflected or reserved against in the Financial Statements, or (c)
incurred since the date of this Agreement in the ordinary course of business,
consistent with past practice of ERC, the LLC and the Subsidiaries and which do
not and are not reasonably likely to have an ERC Material Adverse Effect. For
purposes of this Section 3.10 "material" means in excess of $25,000 individually
or $100,000 in the aggregate. Except as set forth on Schedule 3.10(b) hereto,
reserves are reflected on the Financial Statements dated December 31, 1997 and
May 31, 1998 against all liabilities of ERC, the LLC and the Subsidiaries in
amounts that have been established on a basis consistent with past practices of
ERC, the LLC and the Subsidiaries and in accordance with GAAP.
SECTION 3.11 CONTRACTS.
Except as set forth in Schedule 3.11 hereto, as of the date
hereof neither ERC, the LLC nor any Subsidiary is a party to or bound by any of
the following (each a "Contract" and collectively the "Contracts") and true,
correct and complete copies of which referenced items have previously been
delivered to Purchaser:
(a) any contract for the purchase or sale of services,
equipment, inventory, materials, supplies, or any capital item or items (the
cost or expense of which is more than $100,000 in any single instance or which
cannot be terminated without penalty on 90 days or less notice), or supply
agreements with the federal government or any state or local government or any
agency thereof;
(b) any employment, consulting or similar agreements which
individually are likely to result in payments by ERC, the LLC or any Subsidiary
in excess of $100,000 during any consecutive 12-month period;
(c) any executive severance agreements, non-competition and
retainer agreements, executive compensation plans, bonus plans, deferred
compensation agreements, employee pension plans or retirement plans, employee
stock option or stock purchase plans, employee stock ownership plans and group
life, health and accident insurance and other employee benefit or welfare plans,
agreements or arrangements;
(d) any loan agreements, indentures, mortgages (other than
mortgages securing notes receivable issued to the Company by purchasers of
Intervals ("Timeshare Notes Receivable")), notes (other than Timeshare Notes
Receivable), capital leases or other instruments relating to the borrowing of
money (or guarantees thereof);
(e) any licenses, leases or other agreements to provide or
acquire services or equipment related to the timeshare industry;
(f) any contracts relating to the sale, hypothecation or
factoring of accounts receivable, notes receivable or servicing of accounts
receivable;
(g) any instruments or agreements relating to indebtedness by
way of lease-purchase agreements, conditional sale, guarantee or other
undertakings on which others rely in extending credit, any joint venture
agreements or any chattel mortgages or other security agreements not otherwise
disclosed;
<PAGE>
16
(h) any agreements or contracts with, or any obligation to or
from an ERC Shareholder or any of its affiliates. For purposes of this
Agreement, "Affiliate" shall mean any person or entity that controls or is
controlled by or is under common control with, the person involved;
(i) any joint venture, "partnering" and similar agreements or
understandings;
(j) any agreements relating to the management of, or provision
of services at, each Resort.
(k) any broker, distributor, dealer, franchise, agency, sales
promotion, market research, marketing consulting and advertising agreements to
which ERC, the LLC or any Subsidiary is a party;
(l) any management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which ERC, the LLC or
any Subsidiary is a party and which are not cancellable without penalty or
further payment and without more than 30 days' notice;
(m) any contracts and agreements with the federal government
or any state or local government or any agency thereof to which ERC, the LLC or
any Subsidiary is a party;
(n) any contracts and agreements that limit or purport to
limit the ability of ERC, the LLC or any Subsidiary to compete in any line of
business or with any Person or in any geographic area or during any period of
time;
(o) any contracts and agreements between or among ERC, the LLC
or any Subsidiary and any affiliates of ERC, the LLC or any Subsidiary; and
(p) any other contracts and agreements whether or not made in
the ordinary course of business, which are material to ERC, the LLC or any
Subsidiary or the conduct of the business of ERC, the LLC or any Subsidiary or
the absence of which would have an ERC Material Adverse Effect.
Except as set forth in Schedule 3.11 hereto, none of ERC, the
LLC or any Subsidiary is in material breach of any provisions of, or is in
material violation or default under the terms of, any Contract.
SECTION 3.12 LITIGATION AND COMPLIANCE.
Except as set forth on Schedule 3.12 hereto, there is no
litigation, suit, claim, action, arbitration, administrative proceeding, or, to
the knowledge of ERC, investigation of ERC, the LLC or a Subsidiary or the
operation of any of their businesses pending before any court, arbitrator,
administrative agency or other governmental authority or, to the knowledge of
ERC, threatened against ERC, the LLC or any Subsidiary, by or before any court,
arbitrator, administrative agency or other governmental authority which is not
adequately covered by available insurance (subject to normal deductibles).
Except as otherwise set forth in this Agreement and except where such
non-compliance would not have an ERC Material Adverse Effect, ERC, the LLC and
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the Subsidiaries are in compliance in all material respects with all Laws
including, without limitation, all Laws regarding the advertising, marketing,
offer to sell, or sale of Intervals in each state and local jurisdiction in
which ERC, the LLC and the Subsidiaries are doing business and there is no
order, writ, injunction or decree of any court, arbitrator, administrative
agency or other governmental authority materially affecting the operations or
the business of ERC, the LLC or any of the Subsidiaries or the Merger.
SECTION 3.13 NON-CONTRAVENTION; CONFLICTS.
(a) Except as described on Schedule 3.13, the execution and
delivery of this Agreement and the Related Agreements, the consummation of the
Merger and the compliance with the provisions of this Agreement and the Related
Agreements by ERC, the LLC and ERC Shareholders (in each case to the extent each
is a party thereto) will not conflict with, or result in any violation of, or
default under, or give rise to a right of termination, cancellation or
acceleration of any material obligation of or to a loss of a material benefit
under or result in the creation of any lien upon any of the properties or assets
of ERC, the LLC, or any Subsidiary under, (i) the Articles of Incorporation or
By-laws of ERC or the comparable limited liability agreement, charter or
organizational documents or partnership or joint venture or similar agreement
(as the case may be) of the LLC or any Subsidiary, (ii) any material loan or
credit agreement, note, bond, mortgage, indenture, reciprocal easement
agreement, lease or other agreement, or (iii) any judgment, order, decree,
statute, law, ordinance, rule or regulations applicable to ERC, the LLC or any
Subsidiary (or such other party) or their respective properties or assets, other
than, in the case of clause (ii) or (iii), any such conflicts, violations,
defaults, rights or liens that individually or, in the aggregate, would not (x)
constitute an ERC Material Adverse Effect or (y) prevent the consummation of the
Merger.
(b) The execution and delivery of this Agreement by ERC and
the ERC Shareholders do not, and the performance of this Agreement by ERC and
the ERC Shareholders will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity, except
(i) for applicable requirements, if any, of the Exchange Act, Blue Sky Laws, the
NASD and state takeover laws, and filing and recordation of appropriate merger
documents as required by the DGCL and the RBCA, and (ii) where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger, or
otherwise prevent ERC from performing its obligations under this Agreement, and
would not, individually or in the aggregate, have an ERC Material Adverse
Effect.
SECTION 3.14 LICENSES, PERMITS AND REQUIRED CONSENTS.
ERC, the LLC and each of the Subsidiaries have all federal,
state and local licenses, certifications, approvals, authorizations and permits
necessary to the conduct of their businesses as currently conducted, including,
but not limited to licenses and other permits required by federal, state and
local laws (i) to sell the Intervals in the states and local jurisdictions in
which the Resorts are located, as well as all other state and local
jurisdictions in which the Intervals are being advertised, marketed and sold
(ii) to occupy and operate the Real Property (collectively, "Licenses and
Permits" or in the case of permits issued by any governmental authority, a
"Governmental Permit"). A list of the Licenses, Permits and Governmental Permits
is set forth on Schedule 3.14(a) hereto, true, correct and complete copies of
which have previously been delivered to Purchaser. Except as would not have an
ERC Material Adverse Effect, all Licenses, Permits and Governmental Permits are
in full force and affect, and, no material violations have been made in respect
thereof and no proceeding is pending which is likely to have the effect of
revoking or limiting any such Licenses and Permits. The execution and delivery
of this Agreement and the Related Agreements, and the consummation of the Merger
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18
and the compliance with the provisions of this Agreement and the Related
Agreements by ERC, the LLC and the ERC Shareholders will not conflict, or result
in any violation of or default under any License, Permit or Governmental Permit.
SECTION 3.15 LABOR MATTERS.
Neither ERC, the LLC, nor any of the Subsidiaries has any
obligations, contingent or otherwise, under any employment or consulting
agreements (except if and as set forth in Schedule 3.11 hereto), collective
bargaining agreement or other contract with a labor union or other labor or
employee group. To ERC's knowledge, there are no efforts presently being made or
threatened by or on behalf of any labor union with respect to employees of ERC,
the LLC, or any Subsidiary. There are no pending or threatened collective
strikes, controversies, slowdowns, work stoppages or other labor disturbances
between ERC, the LLC or any Subsidiary. To ERC's knowledge, ERC, the LLC and
each of the Subsidiaries are in compliance in all material respects with all
federal, state, or other applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and have not
and are not engaged in any unfair labor practice; no unfair labor practice
complaint against ERC, the LLC or any Subsidiary is pending or, to ERC's
knowledge, threatened before the National Labor Relations Board.
SECTION 3.16 EMPLOYEE BENEFIT PLANS.
(a) Plans and Material Documents. Schedule 3.16(a) lists (i)
all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus,
stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements, whether legally
enforceable or not, to which ERC, the LLC and any Subsidiary is a party, with
respect to which ERC, the LLC and any Subsidiary has any obligation or which are
maintained, contributed to or sponsored by ERC, the LLC and any Subsidiary for
the benefit of any current or former employee, officer or director of ERC, the
LLC and any Subsidiary, (ii) each employee benefit plan for which ERC, the LLC
and any Subsidiary could incur liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated, (iii) any plan in respect of
which ERC, the LLC and any Subsidiary could incur liability under Section
4212(c) of ERISA and (iv) any contracts, arrangements or understandings relating
to employee benefit matters between ERC, the LLC and any Subsidiary or any of
its Affiliates and any employee of ERC, the LLC and any Subsidiary including,
without limitation, any such contracts, arrangements or understandings relating
to a sale of ERC, the LLC and any Subsidiary (collectively, the "Plans"). The
LLC and any Subsidiary has furnished Purchaser with a true and complete copy of
each Plan and each material document prepared in connection with each such Plan
including, without limitation, (i) a copy of each trust or other funding
arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed Internal Revenue Service ("IRS")
Form 5500, (iv) the most recently received IRS determination letter for each
such Plan, and (v) the most recently prepared financial statement in connection
with each such Plan. Except as disclosed in Schedule 3.16(a), there are no other
employee benefit plans, programs, arrangements or agreements, whether formal or
informal, whether in writing or not, to which ERC, the LLC and any Subsidiary is
a party, with respect to which ERC, the LLC and any Subsidiary has any
obligation or which are maintained, contributed to or sponsored by ERC, the LLC
and any Subsidiary for the benefit of any current or former employee, officer or
director of ERC, the LLC and any Subsidiary. Except as described in Schedule
3,16(a), ERC, the LLC and any Subsidiary has no express or implied commitment,
whether legally
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19
enforceable or not, (i) to create, incur liability with respect to or cause to
exist any other employee benefit plan, program or arrangement, (ii) to enter
into any contract or agreement to provide compensation or benefits to any
individual or (iii) to modify, change or terminate any Plan, other than with
respect to a modification, change or termination required by ERISA or the
Internal Revenue Code of 1986, as amended (the "Code").
(b) Absence of Certain Types of Plans. None of the Plans is a
multi employer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
(a "Multi Employer Plan") or a single employer pension plan (within the meaning
of Section 4001(a)(15) of ERISA) for which ERC, the LLC and any Subsidiary could
incur liability under Section 4063 or 4064 of ERISA (a "Multiple Employer
Plan"). Except as set forth in Schedule 3.16(a), none of the Plans provides for
the payment of separation, severance, termination or similar-type benefits to
any person or obligates ERC, the LLC and any Subsidiary to pay separation,
severance, termination or similar-type benefits solely or partially as a result
of any transaction contemplated by this Agreement or as a result of a "change in
control", within the meaning of such term under Section 280G of the Code. None
of the Plans provides for or promises retiree medical, retiree disability or
life insurance benefits to any current or former employee, officer or director
of ERC, the LLC and any subsidiary. Each of the Plans is subject only to the
laws of the United States or a political subdivision thereof.
(c) Compliance. Except as would otherwise have a Purchaser
Material Adverse Effect, (i) each Plan is now and always has been operated in
all material respects in accordance with its terms and the requirements of all
applicable laws, regulations and rules promulgated thereunder, including,
without limitation, ERISA and the Code, and (ii) ERC, the LLC and any Subsidiary
has performed all obligations required to be performed by it under, is not in
any respect in default under or in violation of, and has no knowledge of any
default or violation by any party to, any Plan. Except as described in Schedule
3.16(c), no action, claim or proceeding is pending or, to the knowledge of ERC,
the LLC and any subsidiary, threatened with respect to any Plan (other than
claims for benefits in the ordinary course) and no fact or event exists that
could give rise to any such action, claim or proceeding.
(d) Qualification of Certain Plans. Each Plan that is intended
to be qualified under Section 401(a) of the Code or Section 401(k) of the Code
has timely received a favorable determination letter from the IRS and to the
knowledge of ERC, the LLC and any Subsidiary, no fact or event has occurred
since the date of such determination letter or letters from the IRS to adversely
affect the qualified status of any such Plan or the exempt status of any such
trust.
(e) Absence of Certain Liabilities. ERC, the LLC and any
Subsidiary has not incurred any liability under, arising out of or by operation
of Title IV of ERISA (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course), including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA or (ii)
the withdrawal from any Multi Employer Plan or Multiple Employer Plan, and no
fact or event exists which could give rise to any such liability.
SECTION 3.17 TAXES AND RETURNS.
Except as disclosed on Schedule 3.17 hereto:
(a) All federal, state, county and local income, franchise,
excise, tariff, gross receipts, sales and use, payroll, real and personal
property and all other taxes, fees, levies, duties, imposts and governmental
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20
charges, assessments and contributions, of any kind whatsoever (including, but
not limited to, any interest and penalties imposed with respect thereto)
("Taxes"), for which ERC, the LLC or any of the Subsidiaries is liable with
respect to any period, or portion of any period, ending on or prior to the date
of the Effective Time and that are or will be required to be paid, collected or
withheld by ERC, LLC or any Subsidiary and remitted to the appropriate
governmental agency or other taxing authority on or prior to the date of the
Effective Time, have been or will be paid collected, withheld, and remitted on
or prior to the date of the Effective Time. Except with respect to certain
receivables from the sale of time share units (as listed in Schedule 3.17
hereto), neither ERC, nor the LLC or any Subsidiary has any liability for any
Taxes that are attributable to any period, or any portion of any period,
beginning prior to the date of the Effective Time but as to which payment is not
actually required until after the date of the Effective Time other than Taxes
(i) attributable to the current taxable year and (ii) the payment of which has
been adequately provided for and separately set forth in the Financial
Statements or the Interim Financial Statements. Copies of all returns, reports,
notices, forms and other documents (including all schedules, exhibits and other
attachments thereto) required to be filed by ERC, the LLC or any Subsidiary on
or prior to the date of the Effective Time with respect to Taxes (including,
without limitation, information returns) ("Tax Returns") have been or will be
timely filed with the appropriate governmental agency or other taxing authority
on or prior to the date of the Effective Time and such Tax Returns and the
copies thereof which have been or will be provided to Purchaser (as set forth in
Schedule 3.17) are or will be true, accurate and complete in all material
respects.
(b) ERC or the LLC has made or will make any elections (and
has taken or will take any other acts) necessary to receive installment sale
treatment under Section 453 of the Code with respect to the sale of certain time
share receivables (as set forth in Schedule 3.17 hereto), and no acts or
omissions have been or will be committed by ERC , the LLC or any of the
Subsidiaries on or prior the Effective Time (other than any acts necessary to
effect the Merger or the transactions contemplated by this Agreement) (i) that
have caused or will cause a disposition of such receivables for purposes of
Section 453 of the Code or (ii) that have otherwise caused or will cause any
income with respect to such receivables to be realized sooner than anticipated
by the terms of such receivables. The amount of income associated with the
deferred Taxes attributable to certain time share receivables of the LLC (as set
forth in Schedule 3.17 hereto) with respect to the 1997 taxable year and the
first five months of the 1998 taxable year of the LLC will not be in excess of
approximately $7,000,000.
(c) Neither ERC, nor the LLC or any of the Subsidiaries is
currently subject to a Tax audit or any other similar proceeding nor has
received from any governmental or taxing authority any written notice of
proposed adjustment, deficiency or underpayment of any Taxes, which notice has
not been satisfied by payment or been withdrawn, and there are no claims
relating to Taxes that have been asserted or threatened against ERC, the LLC or
any of the Subsidiaries. There are no agreements or waivers relating to the
extension of time for the assessment of any Taxes of ERC, the LLC or any of the
Subsidiaries other than routine audit extensions granted in the ordinary course
of business. No consent under Section 341(f) of the Code has been filed with
respect to ERC, the
LLC or any of the Subsidiaries. There are no proposed reassessments of any
property owned by ERC, the LLC or any of the Subsidiaries that could increase
the amount of any Tax to which ERC, LLC or any of the Subsidiaries would be
subject. Neither ERC, nor the LLC or any of the Subsidiaries has (i) been a
member of any affiliated group (other than the affiliated group of which each
such party is currently a member) or (ii) filed a Tax Return on a consolidated,
combined or unitary basis. Neither ERC, nor the LLC or any of the Subsidiaries
is subject to any accumulated earnings tax penalty nor has received any
notification regarding a personal holding company tax. Except with respect to
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21
certain receivables from the sale of time share units (as listed in Schedule
3.17 hereto) neither ERC, nor the LLC or any of the Subsidiaries has any
deferred income reportable for a period ending after the date of the Effective
Time but that is attributable to a transaction (e.g. an installment sale)
occurring in, or resulting from a change in accounting method made for, a period
ending on or prior to the date of the Effective Time. Neither ERC, nor the LLC
or any of the Subsidiaries is obligated under any agreement with respect to
industrial development bonds or other obligations with respect to which the
excludability from gross income of the holder for U.S. federal income tax
purposes could be affected by the transactions contemplated by this Agreement.
No power of attorney that is currently in force has been granted with respect to
any currently ongoing audits of Taxes that could affect ERC, the LLC or any of
the Subsidiaries. At all times since August 25, 1994, ERC has had in effect (i)
a valid election under Section 1362(a) of the Code (or a comparable election
under any successor provision) to be taxed as an S Corporation for federal
income tax purposes (an "S Election") (or comparable election under state or
local law), (ii) to the extent permitted by law, a comparable election in each
state in which it conducts business, and (iii) to the extent permitted by law, a
comparable local law election in each locality in which it conducts business and
is subject to a local income tax. ERC has not received and is not aware of any
proposal from any federal, state or local taxing authority to disallow such S
Election (or comparable state or local law election) for any taxable year. ERC
has not been and is not subject to Taxes imposed by (i) Section 1371 of the
Code, (ii) Section 1375 of the Code, or (iii) Section 1374 of the Code. Neither
ERC, nor the LLC or any of the Subsidiaries is a party to any agreement relating
to allocating or sharing the payment of, or liability for, Taxes for any taxable
period (or portion thereof). Neither ERC, nor the LLC nor any of the
Subsidiaries has any liability for any Taxes pursuant to Treasury Regulation ss.
1.1502-6 or comparable provisions of state, local or foreign tax law or as a
transferee or successor, by contract or otherwise. ERC, the LLC, each Subsidiary
and each of the ERC Shareholders qualifies as a "United States person" within
the meaning of Section 7701(a)(30) of the Code.
SECTION 3.18 RECEIVABLES
Schedule 3.18 sets forth an aged list of the Receivables of
ERC, the LLC and the Subsidiaries as of May 31, 1998 showing separately those
receivables that as of such date had been outstanding (i) 30 days or less, (ii)
31 to 60 days, (iii) 61 to 90 days, and (iv) more than 90 days. All receivables
reflected on the Financial Statements arose from, and the receivables existing
at the Effective Time will have arisen from, the sale of inventory, Intervals or
services to persons not affiliated with ERC, the ERC Stockholders, the LLC or
any Subsidiary (except for receivables arising from sales of Intervals to
employees of ERC, the LLC or any Subsidiary) and in the ordinary course of the
business consistent with past practice.
SECTION 3.19 CONDUCT IN THE ORDINARY COURSE; ABSENCE OF CERTAIN CHANGES,
EVENTS AND CONDITIONS.
Since December 31, 1997, except as disclosed in Schedule 3.19,
the business of ERC, the LLC and the Subsidiaries has been conducted in the
ordinary course and consistent with past practice. As amplification and not
limitation of the foregoing, except as disclosed in Schedule 3.19, since
December 31, 1997, neither ERC, the LLC nor any Subsidiary has:
(i) permitted or allowed any of the real property of ERC, the
LLC or any Subsidiary to be subjected to any material encumbrance,
other than encumbrances (A) that will be released at or prior to the
Closing or (B) in existence on or prior to December 31, 1997;
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22
(ii) redeemed or repurchased any of the capital stock or
declared, made or paid any dividends or distributions (whether in cash,
securities or other property) to the holders of capital stock of ERC,
the LLC or any Subsidiary or otherwise, other than dividends,
distributions and redemptions declared, made or paid by the LLC or any
Subsidiary solely to ERC;
(iii) merged with, entered into a consolidation with or
acquired an interest of 5% or more in any material person or acquired a
substantial portion of the assets or business of any material person or
any material division or line of business thereof, or otherwise
acquired any material assets other than in the ordinary course of
business consistent with past practice, or sold, transferred, leased,
subleased, licensed or otherwise disposed of any material assets other
than in the ordinary course of business consistent with past practice;
(iv) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same,
of, or any other interest in, ERC, the LLC or any Subsidiary;
(v) entered into any agreement, arrangement or transaction
with any of its directors, officers, employees or shareholders (or with
any relative, beneficiary, spouse or affiliate of such person);
(vi) (A) granted any increase, or announced any increase, in
the wages, salaries, compensation, bonuses, incentives, pension or
other benefits payable by ERC, the LLC or any Subsidiary to any of its
employees, including, without limitation, any increase or change
pursuant to any employee benefit plan or (B) established or increased
or promised to increase any benefits under any employee benefit plan,
in either case except as required by Law or involving ordinary
increases consistent with the past practices of ERC, the LLC or such
Subsidiary;
(vii) incurred any indebtedness (other than draws under credit
facilities existing as of the date hereof in the ordinary course of
business consistent with past practice) (A) in excess of $500,000 or
(B) pursuant to any credit agreement, loan agreement, indenture or
other financing arrangement or agreement entered into after the date
hereof;
(viii) made any capital expenditure or commitment for any
capital expenditure other than capital expenditures in the ordinary
course of business and not in excess of $2,000,000 individually or in
the aggregate;
(ix) except in the ordinary course of business, consistent
with past practice, materially amended, modified or consented to the
termination of any material Contract or ERC's, the LLC's or any
Subsidiary's rights thereunder;
(x) amended or restated the Articles of Incorporation or the
By-laws (or other organizational documents) of ERC, the LLC or any
Subsidiary; or
(xi) except with respect to any required elections that are
necessary to account for the sale of time share units on an installment
basis, made any Tax election or settled or compromised any material
federal, state or local income tax liability.
<PAGE>
23
SECTION 3.20 CERTAIN INTERESTS
(a) Except as disclosed in Schedule 3.20, no officer or
director of ERC, the LLC or any Subsidiary and no relative or spouse (or
relative of such spouse) who resides with, or is a dependent of, any such
officer or director:
(i) has any direct or indirect financial interest in any
competitor, supplier or customer of ERC, the LLC or any Subsidiary,
provided, however, that the ownership of securities representing no
more than one percent of the outstanding voting power of any
competitor, supplier or customer, and which are listed on any national
securities exchange or traded actively in the national over-the-counter
market, shall not be deemed to be a "financial interest" so long as the
person owning such securities has no other connection or relationship
with such competitor, supplier or customer;
(ii) owns, directly or indirectly, in whole or in part, or has
any other interest in any tangible or intangible property which ERC,
the LLC or any Subsidiary uses or has used in the conduct of its
business or otherwise; or
(iii) has outstanding any material indebtedness to ERC, the
LLC or any Subsidiary.
(b) Except as disclosed in Schedule 3.20(b), no officer or
director of ERC, the LLC or any Subsidiary and no relative or spouse (or
relative of such spouse) who resides with, or is a dependent of, any such
officer or director has outstanding any indebtedness to the ERC Shareholders.
(c) Except as disclosed in Schedule 3.20(c), neither ERC, the
LLC nor any Subsidiary has any liability or any other obligation of any nature
whatsoever to any officer, director or shareholder of ERC, the LLC or any
Subsidiary or to any relative or spouse (or relative of such spouse) who resides
with, or is a dependent of, any such officer, director or shareholder.
SECTION 3.21 BROKERS.
Except for Salomon Smith Barney, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of ERC. Except for fees and
expenses paid by ERC prior to June 1, 1998, the ERC Shareholders are solely
responsible for the fees and expenses of Salomon Smith Barney.
SECTION 3.22 PRIVATE PLACEMENT.
(a) Each ERC Shareholder understands that (i) the shares of
Purchaser Common Stock will not be registered under the Securities Act on the
ground that the offering and sale of the shares of Purchaser Common Stock are
exempt from registration pursuant to Section 4(2) of the Securities Act, (ii)
the resale or other disposition of the shares of Purchaser Common Stock is
restricted pursuant to the securities laws and the Stockholders' Agreement and
(iii) there can be no assurance that such ERC Shareholder will be able to sell
or dispose of such shares purchased by it pursuant to this Agreement.
<PAGE>
24
(b) The shares of Purchaser Common Stock to be issued to each
ERC Shareholder are being acquired for investment only and not with a view to
any sale or distribution of such shares or any part thereof in violation of the
Securities Act. Each ERC Shareholder agrees at all times to sell or otherwise
dispose of all or any part of the shares of Purchaser Common Stock only pursuant
to a registration, or exemption therefrom, under the Securities Act and in
compliance with applicable state securities laws. Each such ERC Shareholder
shall take any steps necessary to ensure that any purchaser thereof shall agree
not to sell or otherwise dispose of shares of Purchaser Common Stock except in
compliance with the requirements contained in the preceding sentence.
(c) Each ERC Shareholder is an "accredited investor" within
the meaning of Rule 501 promulgated under the Securities Act and has such
knowledge and experience, or has consulted with persons having knowledge and
experience, in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the shares of Purchaser Common Stock. Such
ERC Shareholder has received all the information that such ERC Shareholder deems
material to his or her evaluation of the business, assets, liabilities,
financial condition and results of operations of Purchaser and all the
information that such ERC Shareholder has requested from Purchaser and considers
necessary or appropriate for deciding whether to acquire the shares of Purchaser
Common Stock. Such ERC Shareholder has the ability to bear the economic risks of
such ERC Shareholder's prospective investment and such ERC Shareholder is able,
without materially impairing such financial condition, to hold the shares of
Purchaser Common Stock for an indefinite period of time and to suffer complete
loss on such ERC Shareholder's investment, in the event such a loss should
occur. Each ERC Shareholder acknowledges that the shares of Purchaser Common
Stock received by such person are subject to the various restrictions and other
provisions contained in the Stockholders' Agreement.
SECTION 3.23 KNOWLEDGE OF ERC; DELIVERY OF INFORMATION.
(a) For purposes of this Article III, "knowledge" means, with
respect to ERC, the actual knowledge of the persons listed on Schedule 3.23.
(b) For purposes of this Article III "delivery" when used in
connection with documents to be provided to or disclosed to Purchaser, shall
include the review of (or opportunity to review) such documents by Purchaser,
provided that such documents are listed in the relevant schedule attached hereto
and ERC, upon the request of Purchaser, provides the Purchaser and its
representatives with copies of all such documents or the opportunity to conduct
such review or additional review of such documents as the Purchaser deems
necessary.
ARTICLE IV
ADDITIONAL AGREEMENTS AND REPRESENTATIONS
OF THE PARTIES
SECTION 4.1 CONDUCT OF BUSINESS OF ERC, THE LLC AND PURCHASER
(a) The ERC Shareholders and ERC covenant and agree that,
except as described in Schedule 4.1, between the date hereof and the time of the
Closing, none of the ERC Shareholders, ERC, the LLC nor any Subsidiary shall
conduct its business other than in the ordinary course and consistent with
ERC's, the LLC's and such Subsidiary's past practice. Without limiting the
generality of the foregoing, except as described in Schedule 4.1, the ERC
Shareholders shall
<PAGE>
25
cause ERC, the LLC and each Subsidiary to (i) continue its advertising,
marketing and promotional activities, and selling, pricing and purchasing
policies, in accordance with past practice; (ii) use its commercially reasonable
efforts to (A) preserve intact their business organizations, (B) keep available
to Purchaser the services of the employees of ERC, the LLC and each Subsidiary,
(C) continue in full force and effect without material modification all existing
policies or binders of insurance currently maintained in respect of ERC, the LLC
and each Subsidiary, and (D) preserve and manage its current relationships with
its customers, suppliers and other persons with which it has significant
business relationships in the ordinary course of business consistent with past
practice; (iii) maintain or refrain from terminating, canceling or compromising
any material claims of ERC, the LLC or any Subsidiary and refrain from waiving
any other rights of substantial value to ERC, the LLC or any Subsidiary, except
in the ordinary course of business consistent with past practice, (iv) maintain
or renew any permit or Environmental Permit issued or related to ERC, the LLC or
any Subsidiary and (v) not engage in any practice, take any action, fail to take
any action or enter into any transaction which would be likely to cause any
representation or warranty of the ERC Shareholders or ERC to be untrue or result
in a breach of any covenant made by the ERC Shareholders or ERC in this
Agreement.
(b) Except as described in Schedule 4.1, ERC and each ERC
Shareholder covenant and agree that, prior to the Closing, without the prior
written consent of Purchaser (not to be unreasonably withheld or delayed),
neither ERC, the ERC Shareholders nor any Subsidiary will do any of the things
enumerated in the second sentence of Section 3.19. In the event ERC, any ERC
Shareholder or any Subsidiary desires to obtain the consent of Purchaser to take
any action restricted by this Section 4.1(b), such person shall submit a request
for such consent to Purchaser in accordance with Section 10.2 hereof, and
communicate such request to Richard C. Breeden, Thomas J. Hamel, Gerald l.
Klaben, or Paul Joslyn, in a conversation by telephone. Purchaser shall respond
to such request by the end of the second business day after receipt of such
written request. In the event Purchaser does not so respond, ERC may proceed
with the proposed transaction.
(c) Except for such actions as are listed on Schedule 2.4
hereto, Purchaser covenants and agrees that, between the date hereof and the
Closing, Purchaser will not, without the prior written consent of ERC (not to be
unreasonably withheld or delayed): (i) issue or sell any capital stock or any
option, warrant or other right to acquire the same, of Purchaser or any of its
subsidiaries or (ii) redeem or repurchase any of its capital stock or declare,
make or pay any dividends or distributions (whether in cash, securities, or
other property) to the holders of capital stock of Purchaser or any of its
subsidiaries or otherwise, other than dividends, distributions and redemptions
declared, made or paid of any subsidiary of Purchaser solely to Purchaser. In
the event Purchaser desires to obtain the consent of ERC to take any action
restricted by this Section 4.1(c), Purchaser shall submit a request for such
consent to ERC in accordance with Section 10.2 hereof, and communicate such
request to R. Perry Harris, James A. Mercurio or Richard Winkler in a
conversation by telephone. ERC shall respond to such request by the end of the
second business day after receipt of such written request. In the event ERC does
not so respond, Purchaser may proceed with the proposed transaction.
<PAGE>
26
SECTION 4.2 ACCESS PRIOR TO CLOSING.
(a) Upon reasonable notice from the date hereof through the
Closing, ERC, the LLC and the Subsidiaries, and their respective directors,
officers, agents, and employees, shall afford Purchaser and its representatives
reasonable access to, and opportunity to examine, during normal business hours,
any and all of the premises, properties, contracts, books, records, business,
data, personnel, customers and vendors of or relating to ERC, the LLC and any of
the Subsidiaries.
(b) Upon reasonable notice from the date hereof through
Closing, Purchaser and its subsidiaries and their respective directors,
officers, agents, and employees, shall afford ERC, the LLC and the Subsidiaries
and their respective representatives access to, and opportunity to examine,
during normal business hours, any and all of the premises, properties,
contracts, books records, business, data, personnel, customers and vendors of or
relating to Purchaser and its subsidiaries.
SECTION 4.3 REGULATORY AND OTHER AUTHORIZATIONS.
(a) ERC, the ERC Shareholders, the LLC and the Subsidiaries
(i) shall obtain all governmental, regulatory and third-party approvals,
consents, filings, authorizations or certifications necessary in order for such
parties to consummate the Merger and (ii) will cooperate fully with Purchaser in
promptly seeking to obtain all such approvals, consents, filings authorizations
or certificates.
(b) Purchaser and its subsidiaries (i) shall obtain all
governmental, regulatory and third-party, consents, filings, authorizations or
certificates necessary in order for Purchaser and Acquisition Corp. to
consummate the Merger and (ii) will cooperate fully with ERC, the ERC
Shareholders, the LLC and the Subsidiaries in promptly seeking to obtain all
such approvals, consents, filings, authorizations or certifications.
(c) The parties hereto will not take any action that will have
the effect of delaying, impairing or impeding the receipt of any of the
foregoing and will use their commercially reasonable efforts to secure the same
as promptly as possible.
SECTION 4.4 FURTHER ASSURANCES.
At any time and from time to time at or after the Closing,
Purchaser, ERC and the ERC Shareholders agree to cooperate with each other, to
execute and deliver such other documents, instruments of transfer or assignment,
files, books, and records and do all such further acts and things as may be
reasonably required to carry out the transactions contemplated hereby.
SECTION 4.5 CERTAIN TAX MATTERS.
(a) The ERC Shareholders shall pay (i) all Taxes arising out
of or related to their receipt of the Merger Consideration as contemplated by
this Agreement and (ii) (x) if the transactions contemplated by this Agreement
are not characterized as intended for tax purposes (as described in Section 1.9,
including, but not limited to, the Merger qualifying as a reorganization within
the meaning of Section 368(a) of the Code) for any reason (other than by the
breach by any member of the Purchaser Group (as defined below) of a covenant
contained in this Agreement) or (y) the sale of the timeshare units described in
Section 1.9(a)(iv) are not accounted for as intended in Section 1.9(a)(iv) for
tax purposes for any reason (other than by the breach by any member of the
Purchaser Group (as defined below) of an agreement or covenant contained in this
<PAGE>
27
Agreement), or in the case of both (x) and (y), then the ERC Shareholders shall
indemnify and hold Purchaser, its affiliates (including, following the Closing,
ERC, the LLC and the Subsidiaries), and their successors, transferees and
assigns (collectively, the "Purchaser Group") harmless from and against all
expenses, losses, costs, deficiencies, liabilities and damages (including,
without limitation, reasonable attorney's fees and expenses) incurred or
suffered by such Purchaser Group with respect to Taxes resulting from or arising
out of such alternative characterization or accounting, or both.
(b) The ERC Shareholders shall prepare and file, or cause to
be prepared and filed, with the appropriate governmental authority all federal,
state, local and foreign Tax Returns (as defined in Section 3.17) required to be
filed (with extensions) by or with respect to ERC or the LLC on or prior to the
date of the Effective Time. The ERC Shareholders shall prepare (or cause to be
prepared) and the Purchaser shall timely file (or cause to be timely filed), all
Tax Returns of ERC, the LLC or any Subsidiary with respect to periods ending on
or prior to the date of the Effective Time that are required to be filed after
the date of the Effective Time. In connection with such Tax Returns and the
preparation thereof, the ERC Shareholders shall be permitted to utilize the
installment method under Section 453 of the Code (or similar provisions of
state, local or foreign law), provided all necessary elections are properly made
with respect to the sale of timeshare units (as set forth in Schedule 3.17
hereto).
(c) INTENTIONALLY OMITTED.
(d) Purchaser agrees that it will and will cause ERC and the
LLC and each Subsidiary to make available all such information, employees and
records of ERC and the LLC and each Subsidiary to the ERC Shareholders and their
employees and advisors as the ERC Shareholders may reasonably request with
respect to matters relating to Taxes (including, without limitation, the right
to make copies of such information and records) and will cooperate as requested
by either ERC Shareholder with respect to all matters relating to Taxes
(including, without limitation the filing of Tax Returns, audits, and
proceedings). No member of the Purchaser Group shall file or permit to be filed
any amended Tax Returns with respect to ERC or the LLC or any Subsidiary for any
period (or portion thereof) ending on or prior to the date of the Effective Time
without the prior written consent of the ERC Shareholders, which consent shall
not be unreasonably withheld and no member of the Purchaser Group shall with
respect to Taxes attributable to periods ending on or prior to the date of the
Effective Time take or advocate any position, initiate any claim or otherwise
take any action that would adversely affect the ERC Shareholders, ERC, the LLC
or any Subsidiary.
(e) Notwithstanding any other provision of this Agreement, all
transfer, registration, stamp, documentary, sales, use and similar Taxes
(including, but not limited to, all applicable real estate transfer or gains
Taxes and any stock transfer Taxes) incurred in connection with this Agreement
and the transactions contemplated hereby shall be the responsibility of and be
paid by the ERC Shareholders. The ERC Shareholders and Purchaser shall cooperate
in the timely making of all filings, returns, reports and forms as may be
required in connection therewith.
(f) If for any reason whatsoever (i) the Merger fails to
qualify as a reorganization within the meaning of Section 368(a) of the Code,
(ii) the transactions contemplated by this Agreement are not characterized as
intended in Section 1.9 for tax purposes, or (iii) sales of the timeshare units
described in Section 1.9(a)(iv) are not accounted for as intended in Section
1.9(a)(iv) for tax purposes and, in the case of (i), (ii), or (iii), or any
combination of the foregoing, the Purchaser Group obtains any basis increase in
any asset (other than the equity interests in ERC Ventures, Inc.) (a "Purchaser
<PAGE>
28
Group Basis Increase") then (in addition to any other remedies which may be
available to the ERC Shareholders but without duplication thereof) Purchaser
shall pay to the ERC Shareholders an amount (the "Amount") equal to (a) the
excess of (i) with respect to a taxable period, the liability for the aggregate
amount of Taxes to which the Purchaser Group would have been subject in each
relevant jurisdiction had no such Purchaser Group Basis Increase occurred (and
had Purchaser not been required to make any such payments pursuant to this
Section 4.5(f)), over (ii) the actual liability for such Taxes for such taxable
period (after taking into account any Purchaser Group Basis Increase), plus
(b)(i) professional fees and related costs and expenses, if any, incurred by the
ERC Shareholders in connection with the events described in this Section 4.5(f)
less (ii) professional fees and related costs and expenses, if any, incurred by
Purchaser Group in connection with the events described in this Section 4.5(f);
provided, however, that no payment of such Amount, if any, shall be required if,
to the extent that and for as long as (x) any Taxes (for any reason whatsoever,
other than by the breach by any member of the Purchaser Group of a covenant
contained in this Agreement) have become the obligation of, or are otherwise
imposed on or assessed against, the Purchaser Group by a taxing authority in
connection with the Purchaser Group obtaining a Purchaser Group Basis Increase
and (y) such Taxes have not been paid by the ERC Shareholders or been the
subject of a Final Determination that relieves the members of the Purchaser
Group that have become so obligated or against which such Taxes are imposed or
assessed against from any potential liability for such Taxes. In addition,
Purchaser shall have no obligation to make payment under this Section 4.5(f) to
the extent that the Amount required to be paid is in excess of the amount of
Taxes, if any, that become imposed on or otherwise assessed against the ERC
Shareholders (and that are not otherwise reimbursed by Purchaser under this
Agreement) in connection with a Purchaser Group Basis Increase (taking into
account Taxes imposed on the ERC Shareholders as a result of payments, if any,
made under this Section 4.5(f)). Such payment will be due (subject to a 10 day
grace period) when, as, and to the extent the Purchaser Group derives an actual
benefit (including in the form of any refund or reduction in Tax liability) as
the result of such excess. Any dispute concerning the calculation of payments
due under this Section 4.5(f) will be resolved by a nationally recognized
accounting firm that is jointly selected and mutually engaged by ERC
Shareholders and Purchaser (the fees and expenses of which shall be shared
equally by the ERC Shareholders and the Purchaser).
(g) With respect to the transactions contemplated by this
Agreement and the sale of certain timeshare units as described in Section 1.9
(a)(iv) and their intended treatment for federal state, and local tax purposes
as set forth in Section 1.9, neither the ERC Shareholders, nor ERC, the LLC or
Purchaser, nor any of their respective subsidiaries or other affiliates shall
take any action, or fail to take any action, that would jeopardize such intended
treatment of the transactions contemplated by this Agreement (including, but not
limited to, the Merger qualifying as a reorganization within the meaning of
Section 368(a) of the Code) or the sale of certain timeshare units as described
in Section 1.9(a)(iv) for federal, state and local tax purposes, or both;
provided, however, that in no event shall Purchaser be deemed to have breached
its obligation under this Section 4.5(g) to the extent that the ERC Shareholders
elect to make an indemnification payment to Purchaser in Purchaser Common Stock
pursuant to Section 9.2(b) and such election and payment cause the transactions
contemplated by this Agreement, as a result of a Final Determination, to be
characterized for tax purposes other than in the manner contemplated by Section
1.9. Without limiting the foregoing, no member of the Purchaser Group shall take
a position with respect to tax basis in the assets of a member of the Purchaser
Group that is inconsistent with an acquisition of a "carryover" tax basis in
such assets.
<PAGE>
29
(h) If any member of the Purchaser Group receives any written
notice from any taxing authority proposing any adjustment to any Tax relating to
ERC or the LLC, such member shall give prompt written notice thereof to the ERC
Shareholders, which notice shall describe in detail each proposed adjustment. If
the ERC Shareholders receive any written notice from any taxing authority
proposing any adjustment to any Tax or are notified of any Final Determination
relating to the ERC Shareholders, ERC or the LLC (in each case, with respect to
the transactions contemplated by this Agreement or with respect to the sale of
certain timeshare units as described in Section 1.9(a)(iv), or both), the ERC
Shareholders shall give prompt written notice thereof to either Purchaser or
Acquisition Corp., which notice shall describe in detail each proposed
adjustment or such Final Determination, as applicable.
(i) The parties hereto agree that, except as prohibited by
applicable law, all indemnity payments made pursuant to this Agreement shall be
treated as adjustments to the applicable Merger Consideration. In the event that
the laws of a jurisdiction provide otherwise, such indemnity payments shall be
made in an amount sufficient to indemnify the relevant party on an after-Tax
basis (i.e., such amounts shall be grossed-up for Tax detriments and reduced for
Tax benefits).
(j) Purchaser shall make no claim against the ERC Shareholders
for indemnification pursuant to Section 9.2(a) of this Agreement in respect of
income or withholding Taxes unless the aggregate of all claims for such income
and withholding Taxes exceeds $25,000, in which case the ERC Shareholders shall
be required, subject to the provisions of Article IX (other than the dollar
limitations set forth in the first sentence of Section 9.2(b)) to pay or be
liable for all such claims.
(k) For purposes of determining whether the conditions to
Closing have been satisfied (but not for purposes of the ERC Shareholders'
indemnification of Purchaser for Taxes) the representations in Section 3.17 of
this Agreement shall apply only with respect to items which could have a
Material Adverse Effect. For purposes of Article IX of this Agreement, the
representations in Section 2.12 and Section 3.17 of this Agreement shall be
deemed to have been made without any exception for items identified in Schedule
2.12 and Schedule 3.17 (other than, in the case of Schedule 3.17, with respect
to certain receivables from the sale of time share units so identified and
listed on such Schedule).
SECTION 4.6 DELIVERY.
Subject to the terms and conditions of this Agreement,
Purchaser, ERC and the ERC Shareholders shall cause the delivery of the
respective documents required to be delivered or caused to be delivered by them
pursuant to Article VII below. In addition to their respective obligations under
Section 4.3 and elsewhere in this Agreement, each of Purchaser and ERC also
agree to cooperate and take or cause to be taken all commercially reasonable
steps necessary or desirable and proceed diligently and in good faith to satisfy
each condition to such party's obligations contained in this Agreement and to
consummate the Merger as promptly as practicable.
SECTION 4.7 EMPLOYEES.
The parties contemplate that the employees of ERC, the LLC and
the Subsidiaries shall continue employment on substantially the same terms as in
effect on the Closing Date; provided, however, that nothing herein contained is
<PAGE>
30
intended to limit the discretion of Purchaser to change or eliminate such
employment for any employees following the Closing, subject to severance rights
of certain executive employees as set forth in the severance agreements
described on Schedule 3.11.
SECTION 4.8 EMPLOYMENT AGREEMENT.
Each of Purchaser and R. Perry Harris hereby covenant and
agree to enter into an employment agreement on the Closing Date substantially in
the form attached as Exhibit 4.8 (the "Employment Agreement").
SECTION 4.9 CONFIDENTIALITY.
(a) That certain Confidentiality Agreement dated February 6,
1998 (the "CA") executed between Purchaser and Salomon Smith Barney Inc. on
behalf of ERC, is hereby incorporated by reference in its entirety and Purchaser
and Acquisition Corp agree to abide by all of the covenants and agreements set
forth in the CA, as if they were each an original party thereto. Notwithstanding
the foregoing, (a) Purchaser may issue or make a press release, announcement or
other disclosure regarding this Agreement and the transactions contemplated
hereby which it reasonably determines necessary or desirable under applicable
law or NASDAQ SmallCap Market rule or regulation, and (b) Purchaser may, at any
time after the date of this Agreement, file with the SEC a Form 8-K pursuant to
the Exchange Act with respect to the transactions contemplated by this
Agreement, provided that Purchaser will provide to ERC a copy of any proposed
release or Form 8-K in advance of its dissemination or filing to provide ERC an
opportunity to comment thereon.
(b) ERC and the ERC Shareholders agree to, and shall cause
their Affiliates, agents, representatives and employees to: (i) treat and hold
as confidential (and not disclose or provide access to any person) all
information relating to trade secrets, price, customer and supplier lists,
pricing and marketing plans, policies and strategies, details of client and
consultant contracts, operations methods, business acquisition plans, new
personnel acquisition plans and all other confidential information with respect
to the business, of Purchaser, its subsidiaries, ERC, the LLC and the
Subsidiaries, (ii) in the event that ERC or the ERC Shareholders or any such
agent, representative or employee becomes legally compelled to disclose any such
information, provide Purchaser with prompt written notice of such requirement so
that Purchaser or any of its subsidiaries may seek a protective order or other
remedy or waive compliance with this Section 4.9(b), (iii) in the event that
such protective order or other remedy is not obtained, or Purchaser waives
compliance with this Section 4.9(b), furnish only that portion of such
confidential information which is legally required to be provided and exercise
its best efforts to obtain assurances that confidential treatment will be
accorded such information. ERC and the ERC Shareholders agree and acknowledge
that remedies at law for any breach of their obligations under this Section
4.9(b) are inadequate and that in addition thereto Purchaser shall be entitled
to seek equitable relief, including injunction and specific performance, in the
event of any such breach.
SECTION 4.10 NOTICE OF DEVELOPMENTS. (a) Prior to the Closing, ERC and the ERC
Shareholders shall promptly notify Purchaser in writing of (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could result in any breach of a representation or warranty or
covenant of ERC in this Agreement or which could have the effect of making any
representation or warranty of ERC in this Agreement untrue or incorrect in any
material respect (ii) all other material developments affecting the assets,
liabilities, business, financial condition, operations, results of operations,
customer relations, employee relations, projections or prospects of ERC, the LLC
<PAGE>
31
or any Subsidiary and (iii) all acquisition of real property or any interest
therein.
(b) Prior to the Closing, Purchaser and its subsidiaries shall
promptly notify ERC, the LLC and the Subsidiaries in writing of (i) all events,
circumstances, facts, and occurrences arising subsequent to the date of this
Agreement which could result in a breach of a representation or warranty or
covenant of Purchaser in this Agreement or which could have the effect of making
any representation or warranty of Purchaser in this Agreement untrue or
incorrect in any material respect, (ii) all other material developments
affecting the assets, liabilities, business, financial condition, operations,
results of operations, customer relations, employee relations, projections or
prospects of Purchaser or any of its subsidiaries and (iii) all acquisitions of
real property or an interest therein.
SECTION 4.11 NO SOLICITATION OR NEGOTIATION.
Each of ERC and the ERC Shareholders agree that between the
date of this Agreement and the earlier of (i) the Closing and (ii) the
termination of this Agreement pursuant to Article VIII, none of the ERC
Shareholders, ERC, the LLC or any Subsidiary nor any of their respective
affiliates, officers, directors, investment bankers, representatives or agents
will (a) solicit, initiate, consider, encourage or accept any other proposals or
offers from any person (i) relating to any acquisition or purchase of all or any
portion of the capital stock of ERC, the LLC or any Subsidiary or assets of ERC,
the LLC or any Subsidiary (other than assets to be sold in the ordinary course
of business consistent with past practice), (ii) to enter into any business
combination with the ERC, the LLC, or any Subsidiary or (iii) to enter into any
other extraordinary business transaction involving or otherwise relating to ERC,
the LLC or any Subsidiary, or (b) participate in any discussions, conversations,
negotiations and other communications regarding, or furnish to any other person
any information with respect to, or otherwise cooperate in any way, assist or
participate in, facilitate or encourage any effort or attempt by any other
person to seek to do any of the foregoing. ERC and the ERC Shareholders
immediately shall cease and cause to be terminated all existing discussions,
conversations, negotiations and other communications with any Persons conducted
heretofore with respect to any of the foregoing. ERC and the ERC Shareholders
agree not to, and to cause the LLC and each Subsidiary not to, without the prior
written consent of Purchaser, release any Person from, or waive any provision
of, any confidentiality or standstill agreement to which the ERC Shareholders,
ERC, the LLC or any Subsidiary is a party.
ARTICLE V
INTENTIONALLY OMITTED
<PAGE>
32
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 CLOSING CONDITIONS OF ERC AND THE ERC SHAREHOLDERS.
The obligations of ERC and the ERC Shareholders under this
Agreement are subject to the reasonable satisfaction, or waiver by the ERC
Shareholders, at or prior to the Closing, of each of the following conditions:
(a) The representations and warranties of Purchaser contained
in this Agreement shall be true and correct in all material respects on the date
hereof and on the Closing Date as though made on and as of the Closing Date or,
in the case of representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date, provided,
however, that if any portion of any representation or warranty is already
qualified by materiality, for purposes of determining whether this Section
6.1(a) has been satisfied with respect to such portion of such representation or
warranty, such portion of such representation or warranty as so qualified must
be true and correct in all respects.
(b) Purchaser shall have performed and complied with all of
the covenants and agreements in all material respects and satisfied all of the
conditions in all material respects required by this Agreement to be performed
or complied with or satisfied by Purchaser at or prior to the Closing;
(c) On the Closing Date, there shall be no injunction,
restraining order or decree of any nature of any court or governmental authority
in effect that restrains or prohibits the consummation of the transactions
contemplated by this Agreement;
(d) Purchaser shall have executed and delivered the Related
Agreements to the respective parties thereto.
(e) Acquisition Corp. shall have received, from R. Perry
Harris, 100% of the equity interests in ERC Ventures, Inc., free and clear of
all liens and encumbrances, in exchange for (i) a payment of nominal
consideration of $10, and (ii) a payment of $150,000 to reimburse R. Perry
Harris for a deposit delivered on behalf of ERC Ventures, Inc to the Bankruptcy
Court in the District of Rhode Island in relation to the purchase of certain
assets.
SECTION 6.2 CLOSING CONDITIONS OF PURCHASER.
The obligations of Purchaser under this Agreement are subject
to the reasonable satisfaction, or waiver by Purchaser, at or prior to the
Closing, of each of the following conditions:
(a) The representations and warranties of ERC and the ERC
Shareholders contained in this Agreement shall be true and correct in all
material respects on the date hereof and on the Closing Date as though made on
and as of the Closing Date or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on and as of such
earlier date, provided, however, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of determining
whether this Section 6.2(a) has been satisfied with respect to such portion of
such representation or warranty, such portion of such representation or warranty
as so qualified must be true and correct in all respects.
(b) ERC, the LLC and each of the Subsidiaries shall have
performed and complied with all of the covenants and agreements in all material
<PAGE>
33
respects and satisfied all of the conditions in all material respects required
by this Agreement to be performed or complied with or satisfied by it or them at
or prior to the Closing;
(c) All authorizations, consents, licenses, approvals and
other actions by, and all notices to and filings with, any lender, governmental
authority, or other persons that are required for the due execution, delivery
and performance of this Agreement listed on Schedule 6.2(c) hereto, or the
failure of which to be obtained would constitute an ERC Material Adverse Effect,
shall have been made or obtained in form and substance reasonably satisfactory
to Purchaser, and all waiting periods which are required by law to have expired
or to have been terminated prior to consummation of the Merger shall have
expired or been terminated;
(d) On the Closing Date, (i) there shall be no injunction,
restraining order or decree of any nature of any court or governmental authority
in effect that restrains or prohibits the consummation of the transactions
contemplated by this Agreement and (ii) no action, order to show cause, or other
motion or pleading brought by any third party seeking such an injunction,
restraining order or decree shall be pending before any court or governmental
authority;
(e) (i) On or prior to July 31, 1998 (A) the Bankruptcy Court
of the Northern District of New York (the "Bankruptcy Court"), which currently
has jurisdiction over the bankruptcy estate of The Bennett Funding Group, Inc.,
Bennett Management and Development Corporation and certain other related
entities (the "Estate"), shall not have taken any action to assert jurisdiction
over or otherwise impede the Merger or the other transactions contemplated
hereby, (B) neither the Official Creditors Committee of the Estate nor any other
person shall have asserted in writing to the Estate or the Bankruptcy Court that
such court's approval is required with respect to the Merger or the other
transactions contemplated hereby and (C) the Company shall not have reasonably
concluded that the approval of the Bankruptcy Court is required with respect to
the Merger or the other transactions contemplated hereby, unless (ii) the
Bankruptcy Court shall have subsequently (A) determined that its approval of the
Merger is not required or (B) approved the Merger.
(f) Acquisition Corp. shall have received, from R. Perry
Harris, 100% of the equity interests in ERC Ventures, Inc., free and clear of
all liens and encumbrances, in exchange for (i) a payment of nominal
consideration of $10, and (ii) a payment of $150,000 to reimburse R. Perry
Harris for a deposit delivered on behalf of ERC Ventures, Inc to the Bankruptcy
Court in the District of Rhode Island in relation to the purchase of certain
assets.
(g) (i) R. Perry Harris shall have executed and delivered to
Purchaser the Employment Agreement and (ii) the ERC Shareholders shall have
executed and delivered to Purchaser the Stockholders' Agreement (as defined in
Section 7.1(g)).
(h) Purchaser shall have received an undertaking which shall
not have been withdrawn prior to Closing of Donovan, Sullivan & Ryan,
independent public accountants to ERC, to cooperate with Purchaser in causing to
become effective an registration statement with the Securities and Exchange
Commission for a public offering of Purchaser Common Stock, by providing such
assistance, including such comfort letters and other accounting opinions and
consents to be included in a registration statement for Purchaser Common Stock,
as shall be necessary or desirable to effect such a registration and public
offering, consistent with customary practices; and
(i) Each of the directors of ERC shall have resigned.
<PAGE>
34
ARTICLE VII
THE CLOSING
SECTION 7.1 DELIVERIES BY ERC AND ERC SHAREHOLDERS.
At the Closing, ERC or Purchaser shall receive from ERC or the
ERC Shareholders (as applicable) the following and the ERC Shareholders (as
applicable) shall cause the same to be delivered to Purchaser:
(a) A certificate or certificates representing the stock of
ERC, duly endorsed in blank by the ERC Shareholders for transfer, or accompanied
by a duly executed stock power or assignment form, duly executed in blank;
(b) The resignation of all officers and directors of ERC,
effective as of the Closing Date;
(c) Certificate of good standing from the Secretary of State
of each of the states in which ERC, the LLC or any of the Subsidiaries is
incorporated or organized, stating that each such entity is a validly existing
corporation (or limited liability company, as the case may be);
(d) A certificate, dated as of the Closing, signed by an
officer of ERC to the effect that the conditions specified in Sections 6.2(a)
and (b) above have been satisfied in all material respects.
(e) Copies of duly adopted resolutions approving the
execution, delivery and performance of this Agreement and the other instruments
contemplated hereby certified by the Secretary of ERC;
(f) A true, correct and complete copy of the Articles of
Incorporation (or similar public record of formation), as amended, of ERC, the
LLC and each Subsidiary, certified by the Secretary of State of its state of
incorporation or formation, and a true, correct and complete copy of the Bylaws,
operating agreement or partnership limited liability company agreement (as
applicable) as amended, of ERC, the LLC and each Subsidiary, certified by the
secretary of other appropriate party of each such entity;
(g) Executed counterparts of (i) the Stockholders' Agreement
substantially in the form attached hereto as Exhibit 7.1(g) (the "Stockholders'
Agreement"; and together with the Employment Agreement, the "Related
Agreements") and (ii) the Employment Agreement, executed by the parties thereto
other than Purchaser;
(h) A certificate of the secretary of ERC certifying (i) the
resolutions referred to in clause in clause (f) above, (ii) the Bylaws of ERC
and (iii) the names and signatures of the officers of ERC authorized to sign
this Agreement and each certificate or other document delivered on behalf of ERC
pursuant hereto.
(i) An affidavit from each of ERC, the LLC, each Subsidiary,
and each ERC Shareholder stating that such party qualifies as a "United States
person" within the meaning of Section 7701(a)(30) of the Code.
<PAGE>
35
SECTION 7.2 PURCHASER'S DELIVERIES.
At the Closing, the ERC Shareholders shall receive from
Purchaser the following and Purchaser shall cause the same to be delivered to
the ERC Shareholders:
(a) the Merger Consideration in accordance with the provisions
of Section 1.3 hereof;
(b) Certificate of good standing from the Secretary of State
of the State of Florida (in the case of Purchaser) and the Secretary of State of
the State of Delaware (in the case of Acquisition Corp.) stating that Purchaser
and Acquisition Corp are each validly existing corporations in good standing;
(c) A certificate, dated as of the Closing, signed by an
officer of Purchaser to the effect that the conditions specified in Section
6.1(a) and (b) above have been satisfied in all material respects;
(d) Copies of duly adopted resolutions of Purchaser's Board of
Directors and Acquisition Corp.'s shareholders and Board of Directors approving
the execution, delivery and performance of this Agreement and the Related
Agreements, certified by their respective Secretaries;
(e) The Stockholders' Agreement and the Employment Agreement
each executed by Purchaser.
(f) A true, correct and complete copy of the Articles of
Incorporation, as amended, of each of Purchaser and Acquisition Corp., certified
by the Secretary of State of its state of incorporation or formation, and a
true, correct and complete copy of the Bylaws, certified by the secretary of
Purchaser and Acquisition Corp.
(g) A certificate of the secretary of Purchaser and
Acquisition Corp. certifying (i) the resolutions referred to in clause (d)
above, (ii) the By-laws of Purchaser and Acquisition Corp., and (iii) the names
and signatures of the officers of Purchaser and Acquisition Corp. authorized to
sign this Agreement and each certificate or other document delivered on their
behalf pursuant hereto.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION.
Notwithstanding anything in this Agreement to the contrary,
this Agreement may be terminated only:
(a) by mutual consent of the Boards of Directors of Purchaser
and ERC;
(b) by Purchaser or ERC if, for any reason, the Closing has
not occurred on or before September 15, 1998;
<PAGE>
36
(c) by Purchaser, upon a breach of any representation,
warranty, agreement or covenant on the part of ERC or the ERC Shareholders set
forth in this Agreement, such that the conditions set forth in Section 6.2(a) or
6.2(b), as the case may be, would be incapable of being satisfied by September
15, 1998;
(d) by ERC, upon a breach of any representation, warranty,
agreement or covenant on the part of Purchaser, such that the conditions set
forth in Section 6.1(a) or 6.1(b), as the case may be, would be incapable of
being satisfied by September 15, 1998; or
(e) by Purchaser or ERC if any court of competent jurisdiction
in the United States or other governmental authority shall have issued an order,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
is or shall have become non-appealable.
SECTION 8.2 EFFECT OF TERMINATION.
Upon the termination of this Agreement pursuant to Section
8.1, this Agreement shall forthwith be void and of no further force and effect
without any liability or obligation on the part of either party, except (a) that
the provisions set forth in Sections 4.9, Article X, Section 8.3, Section 8.4
and in this Section 8.2 shall continue in full force and effect and (b) that
nothing herein shall relieve either party from liability for any breach of this
Agreement.
SECTION 8.3 FEES AND EXPENSES.
All expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger or any other transaction is consummated,
provided, however, that, irrespective of whether the Merger is consummated,
Purchaser shall pay the reasonable legal and accounting fees and expenses of ERC
and the ERC Shareholders up to a maximum of $250,000, except in the event that
the transaction is terminated due to a breach by ERC or the ERC Shareholders of
their obligations hereunder.
SECTION 8.4 SPECIFIC PERFORMANCE.
It is expressly agreed and understood that nothing in this
Agreement shall preclude either party from seeking specific performance,
injunctive relief or any other remedies not involving the payment of monetary
damages in the event of any material breach or material violation of any
provision of this Agreement by the other party (whether or not this Agreement is
terminated as a result of such breach or violation) and each party acknowledges
that, in light of the unique benefit to it of its rights under this Agreement,
such remedies shall be available in respect of any such breach or violation by
it in any suit properly instituted in a court of competent jurisdiction.
<PAGE>
37
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Each of the representations and warranties made by Purchaser
and ERC and each ERC Shareholder in this Agreement or pursuant hereto shall
survive for a period of 18 months after the Closing Date; provided, however,
that representations, warranties, covenants and promises made by Purchaser and
ERC and each ERC Shareholder with respect to Tax matters shall survive until 60
days after the expiration of the statute of limitations (including any
extensions thereof pursuant to the delivery of waivers or other documents having
similar effect) applicable to any assessments by any taxing authority of Taxes
with respect to which such representations, warranties, covenants and promises
relate. No claim may be asserted against any party hereto and no party hereto
shall have any liability to the other party hereto, with respect to any
inaccuracy in or any breach of any representation or warranty after the survival
period, except that if a claim shall be first asserted within the applicable
period, such claim shall not thereafter be barred. Each representation,
warranty, covenant and agreement of the parties contained in this Agreement is
independent of each other representation, warranty, covenant, and agreement. The
Closing of the Merger shall not constitute a waiver of any rights to
indemnification. The rights of each indemnified party to obtain indemnification
with respect to each indemnifying party's representations and warranties shall
not be reduced by any investigation made at any time by or on behalf of such
indemnified party.
SECTION 9.2 INDEMNIFICATION OF PURCHASER.
(a) The ERC Shareholders agree, jointly and severally, subject
to the limitations in Section 4.5(j) and Section 9.2(b), to indemnify and hold
Purchaser, its affiliates (including, following the Effective Time, ERC, the LLC
and the Subsidiaries), and their officers, directors, employees, agents,
successors, transferees and assigns (each a "Purchaser Indemnified Party")
harmless from and against all expenses, losses, costs, Taxes, deficiencies,
liabilities and damages (including, without limitation, reasonable attorney's
fees and expenses) incurred or suffered by them (collectively, "Purchaser
Indemnifiable Damages") resulting from or arising out of (i) any breach of a
representation or warranty made by ERC or any ERC Shareholder in or pursuant to
this Agreement, (ii) any breach of the covenants or agreements made by ERC or
any ERC Shareholder in this Agreement, or (iii) any inaccuracy in any
certificate delivered by ERC or any ERC Shareholder pursuant to this Agreement,
or (iv) with respect to any Taxes imposed on the ERC Shareholders, ERC, the LLC
or any of the Subsidiaries with respect to any period, or any portion of any
period, ending on or prior to the date of the Effective Time (except to the
extent such Taxes are imposed by reason of a breach by any member of the
Purchaser Group of a covenant or agreement relating to the treatment of the
transactions contemplated by this Agreement as intended in Section 1.9 or
relating to the sale of certain timeshare units as described in Section 1.9
(a)(iv), or both); provided that no indemnity for Taxes shall arise unless such
Taxes are in excess of the reserve for Taxes reflected on either the Financial
Statements or the Interim Financial Statements.
(b) Notwithstanding the foregoing, no claim other than a claim
in respect of income or withholding Taxes (which shall be subject only to the
limitation set forth in Section 4.5(j)) may be made against the ERC Shareholders
for indemnification pursuant to Section 9.2(a) with respect to any claim by
Purchaser unless such claim shall be for an amount in excess of $10,000 (other
than a claim in respect of income or withholding Taxes which shall be subject to
the limitation set forth in Section 4.5(j)) and the aggregate of all claims
<PAGE>
38
shall exceed $500,000, in which case the ERC Shareholders shall be required to
pay or be liable for all claims hereunder; provided the maximum amount for which
all ERC Shareholders may be liable for indemnification hereunder (excluding
claims in respect of income or withholding Taxes) shall not exceed $6,000,000,
of which one-third will be payable in cash, and two-thirds shall be payable (at
the option of the ERC Shareholders) in cash or Purchaser Common Stock (valued at
the greater of its average closing market price for the ten trading days prior
to the payment date or $2.00 per Share). In the event the ERC Shareholders do
not own sufficient shares of Purchaser Common Stock to make the required payment
in such form, such payment will be paid in cash to the extent of shortfall. In
the event that (i) the ERC Shareholders elect to make such an indemnification
payment in Purchaser Common Stock and (ii) such election causes the transactions
contemplated by this Agreement, as a result of a Final Determination (as defined
in Section 1.9), to be characterized for tax purposes in a manner other than the
manner originally intended in Section 1.9 (including, but not limited to, the
Merger qualifying as a reorganization within the meaning of Section 368(a) of
the Code), then (x) Purchaser shall have no obligation to comply with the
covenants made in Section 1.9 and Section 4.5 and (y) the ERC Shareholders shall
be deemed to have breached their covenants made in Section 1.9 and Section 4.5.
For purposes of this Section 9.2, the amount of Purchaser Indemnifiable Damages
hereunder shall be net of any insurance proceeds and any indemnity contribution
or other similar payment payable by any third-party with respect thereto. The
amount of any Purchaser Indemnifiable Damages for purposes of this Section 9.2
shall be (i) reduced by an amount that accounts for any Tax benefits that
Purchaser shall acquire as a result of its receipt or accrual of an
indemnification amount related to such Purchaser Indemnifiable Damages and (ii)
increased by an amount that accounts for any Tax detriment that Purchaser shall
suffer as a result of its receipt of accrual of an indemnification amount
related to such Purchaser Indemnifiable Damages.
(c) Purchaser agrees that it shall give the ERC Shareholders
prompt written notice of any claim by any Purchaser Indemnified Party or any
third party claim that Purchaser receives against any Purchaser Indemnified
Party, ERC, the LLC or any Subsidiary, as to which any Purchaser Indemnified
Party is entitled to request indemnification hereunder (a "Potential Claim
Notice"). The Potential Claim Notice shall include a description of the nature
of the claim, the identity of the party by whom it is being asserted and the
basis for Purchaser's belief that the claim entitles the Purchaser Indemnified
Party to indemnification hereunder. In the case of third-party claims, the ERC
Shareholders shall then have 20 calendar days in which either to (i) agree that
the claim described in the Potential Claim Notice is covered by this indemnify
or (ii) deny that the claim is covered by this indemnity. In the event that the
ERC Shareholders agree that the third-party claim is covered by this indemnity
(such claim being deemed to be a "Covered Claim" for purposes of this
Agreement), (i) the ERC Shareholders shall reimburse Purchaser Indemnified Party
for reasonable costs incurred by the Purchaser Indemnified Party in the defense
of such Covered Claim prior to the assumption of such defense by such ERC
Shareholders (ii) such ERC Shareholders shall have the right to control the
defense of such claim with counsel selected by the ERC Shareholders (subject to
the reasonable approve of Purchaser) and (iii) the ERC Shareholders shall pay
all costs of defense, settlement or judgment relating to such Covered Claim. If
control of the defense is assumed by the ERC Shareholders, Purchaser shall have
the right to participate in the defense of such claim with counsel it selects
but the costs of such counsel shall be borne by Purchaser. In the event that the
ERC Shareholders deny that a third-party claim is covered by this indemnity,
Purchaser shall have the right, subject to the next sentence, to control the
defense of the claim and shall pay all costs of defense, settlement or judgment,
provided that Purchaser shall keep the ERC Shareholders reasonably informed as
to the status of any proceedings and shall consult with the ERC Shareholders
prior to entering into any settlement of the claim (notwithstanding the
<PAGE>
39
foregoing, the ERC Shareholders shall not have the right to disapprove of any
settlement unless the ERC Shareholders agree that the claim underlying the
settlement is covered by this indemnity).
(d) Purchaser grants to the ERC Shareholders and its duly
appointed representatives the right to negotiate, resolve, settle or contest any
claim for Tax with respect to which the ERC Shareholders would be obligated to
indemnify Purchaser or any subsidiary or affiliate under this Agreement (if such
contest or claim were not negotiated, resolved or settled in favor of the ERC
Shareholders), provided that the ERC Shareholders acknowledge such obligation in
writing and allow Purchaser to participate at its own expense, and Purchaser
agrees to cooperate and cause its affiliates to cooperate and take all actions
requested by the ERC Shareholders with respect to the foregoing. If the ERC
Shareholders do not assume the defense of any such claim for Tax, Purchaser may
individually defend the same in such manner as it may deem appropriate, but not
settle or otherwise compromise any such audit or proceeding at the expense of
the ERC Shareholders without first obtaining the written consent of the ERC
Shareholders, which consent shall not be unreasonably withheld.
SECTION 9.3 INDEMNIFICATION OF ERC AND THE ERC SHAREHOLDERS.
(a) Purchaser agrees to indemnify and hold each of the ERC
Shareholders harmless from and against all expenses, losses, costs, Taxes,
deficiencies, liabilities and damages (including, without limitation, counsel,
fees and expenses) incurred or suffered by the ERC Shareholders (collectively,
"ERC Indemnifiable Damages") from or arising out of (i) any breach of a
representation or warranty made by Purchaser in or pursuant to this Agreement,
(ii) any breach of the covenants or agreements made by Purchaser in this
Agreement, (iii) any inaccuracy in any certificate delivered by Purchaser
pursuant to this Agreement, or (iv) the operation by Purchaser of the business
of ERC, the LLC or any of the Subsidiaries following the Closing.
(b) Notwithstanding the foregoing, no claim may be made
against Purchaser for indemnification pursuant to Section 9.3(a) with respect to
any claim by the ERC Shareholders unless such claim shall be for an amount in
excess of $10,000 and the aggregate of all claims shall exceed $500,000, in
which case Purchaser shall be required to pay or be liable for all claims
hereunder; provided that the maximum amount for which Purchaser may be liable
for indemnification hereunder shall not exceed $6,000,000 of which one-third
will be payable in cash, and two-thirds shall be payable (at the option of
Purchaser) in cash or Purchaser Common Stock (valued at the greater of its
average closing market price for the ten trading days prior to the payment date
or $2.00 per Share). For purposes of this Section 9.2, the amount of ERC
Indemnifiable Damages hereunder shall be net of any insurance proceeds and any
indemnity contribution or other similar payment payable by any third-party with
respect thereto. The amount of any ERC Indemnifiable Damages for purposes of
this Section 9.3 shall be (i) reduced by an amount that accounts for any Tax
benefits that the ERC Shareholders shall acquire as a result of their receipt or
accrual of an indemnification amount related to such ERC Indemnifiable Damages
and (ii) increased by an amount that accounts for any Tax detriment that the ERC
Shareholders shall suffer as a result of their receipt of accrual of an
indemnification amount related to such ERC Indemnifiable Damages.
(c) The ERC Shareholders agree that they shall give Purchaser
prompt written notice of any claim by the ERC Shareholders or any third party
claim that the ERC Shareholders receive, as to which the ERC Shareholders are
entitled to request indemnification hereunder (a "Potential Claim Notice"). The
Potential Claim Notice shall include a description of the nature of the claim,
<PAGE>
40
the identity of the party by whom it is being asserted and the basis for the ERC
Shareholders' belief that the claim entitles them to indemnification hereunder.
In the case of third-party claims, Purchaser shall then have 20 calendar days in
which either to (i) agree that the claim described in the Potential Claim Notice
is covered by this indemnity or (ii) deny that the claim is covered by this
indemnity. In the event that Purchaser agrees that the third-party claim is
covered by this indemnity (such claim being deemed to be a "Covered Claim" for
purposes of this Agreement), (i) Purchaser shall reimburse the ERC Shareholders
for reasonable costs incurred in the defense of such Covered Claim prior to the
assumption of such defense by Purchaser (ii) Purchaser shall have the right to
control the defense of such claim with counsel selected by Purchaser (subject to
the reasonable approve of the ERC Shareholders) and (iii) Purchaser shall pay
all costs of defense, settlement or judgment relating to such Covered Claim. If
control of the defense is assumed by Purchaser, the ERC Shareholders shall have
the right to participate in the defense of such claim with counsel they select
but the costs of such counsel shall be borne by the ERC Shareholders. In the
event that Purchaser denies that a third-party claim is covered by this
indemnity, the ERC Shareholders shall have the right, subject to the next
sentence, to control the defense of the claim and shall pay all costs of
defense, settlement or judgment, provided that the ERC Shareholders shall keep
Purchaser reasonably informed as to the status of any proceedings and shall
consult with Purchaser prior to entering into any settlement of the claim
(notwithstanding the foregoing, Purchaser shall not have the right to disapprove
of any settlement unless Purchaser agrees that the claim underlying the
settlement is covered by this indemnity).
SECTION 9.4 EXCLUSIVITY OF INDEMNIFICATION FOR CONTRACTUAL BREACHES.
No party hereto is making any representation, warranty or
covenant other than those contained herein. Anything herein to the contrary
notwithstanding, following the Closing, the rights of the parties under the
provisions of this Article IX shall be the sole and exclusive remedy available
to the parties with respect to claims or damages arising out of breaches of the
representations and warranties or other contractual obligations of the party set
forth in this Agreement. Nothing in the foregoing shall preclude the parties
from seeking any claims or damages under the Related Agreements to remedy
breaches by the parties under such Agreements.
SECTION 9.5 CONSENT TO JURISDICTION. Each party hereto hereby irrevocably
submits to the non-exclusive jurisdiction of any state or federal court sitting
in the City of New York in any action or proceeding arising out of or relating
to this Agreement or any of the transactions contemplated hereby and hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such state court or, to the extent permitted by law,
in such federal court. Each of the parties hereby irrevocably consents to the
service of process in any such action or proceeding by the mailing by certified
mail of copies of any service or copies of the summons and complaint and any
other process to such party at the address specified in Section 10.2 hereof. The
parties agree that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Section 9.6 shall affect
the right of a party to serve legal process in any other manner permitted by law
or affect the right of a party to bring any action or proceeding in the courts
of other jurisdictions.
SECTION 9.6 CONTINUATION OF INDEMNITY PROTECTIONS POST-CLOSING.
Purchaser agrees that all rights to indemnification existing
in favor of the present directors, members, officers and managers of each of
ERC, The LLC and the Subsidiaries (collectively, the "Indemnified Fiduciaries")
as provided in the Articles of Incorporation, Articles of Organization, By-Laws,
Operating Agreement or similar organizational documents of any such entity as in
<PAGE>
41
effect as of the date hereof or pursuant to the terms of any written agreements
providing for indemnification (other than any such agreements entered into in
contemplation of the execution of this Agreement) entered into between ERC, the
LLC or any Subsidiary and any of the Indemnified Fiduciaries shall survive the
Merger and shall continue in full force and effect (without modification or
amendment, except as required by applicable law or except to make changes
permitted by law that would expand the scope of the Indemnified Fiduciaries'
right of indemnification), to the fullest extent and for the maximum term
permitted by law, and shall be enforceable by the Indemnified Fiduciaries
against the relevant entity.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 GOVERNING LAW AND CONSENT TO JURISDICTION.
This Agreement shall be deemed to be made in, and in all
respects shall be interpreted, construed and governed by and in accordance with
the internal laws of, the State of New York.
SECTION 10.2 NOTICES.
Any notices or other communications required under this
Agreement shall be in writing, shall be deemed to have been given when delivered
in person, by telecopier, when delivered to a recognized next business day
courier, or, if mailed, when deposited in the United States mail first class,
registered or certified, return receipt requested, with proper postage prepaid,
addressed as follows or to such other address as notice shall have been given
pursuant hereto:
If to ERC or any ERC Shareholder:
R. Perry Harris
Eastern Resorts Company
115 Long Wharf
P.O. Box 2000
Newport, Rhode Island 02840
Fax # 401-846 -3888
with a copy to
Stephen R. Goldstein, Esq.
Goldstein, Kaitz & Fellman, LLP
Watermill Center
800 South Street, Suite 380
Waltham, MA 02154
Fax # (781) 894-2129
<PAGE>
42
If to Purchaser
Richard C. Breeden
Chief Executive Officer
Equivest Finance, Inc.
100 Northfield Street
Greenwich, CT 06830
Fax # (203) 618-0063
with a copy to:
Linda C. Quinn, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Fax # (212) 848-7179
SECTION 10.3 ASSIGNMENT.
Neither this Agreement nor any rights hereunder may be
assigned, by operation of law or otherwise.
SECTION 10.4 SECTION HEADINGS.
The section headings contained in this Agreements are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 10.5 COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
SECTION 10.6 AMENDMENT.
Except as hereinafter provided, this Agreement may not be
amended except by a writing signed by the party to be charged.
SECTION 10.7 ENTIRE AGREEMENT.
This Agreement and the Related Agreements referred to herein
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. Except as may be expressly stated or provided herein, no
party hereto has relied on any representation, warranty, covenant or agreement
by another party or such other party's agents, officers or employees, in
entering into this Agreement and consummating the transactions contemplated
hereby.
<PAGE>
43
SECTION 10.8 BINDING EFFECT.
Subject to Section 10.3, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
SECTION 10.9 SEVERABILITY.
In case any provision in this Agreements shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be affected or impaired
thereby.
<PAGE>
44
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
EASTERN RESORTS CORPORATION
BY: /s/ R. Perry Harris
---------------------------------
NAME: R. Perry Harris
TITLE: Chairman and
Chief Executive Officer
(CORPORATE SEAL)
EQUIVEST FINANCE, INC.
BY: /s/ Richard C. Breeden
---------------------------------
NAME: Richard C. Breeden
TITLE: Chairman and
Chief Executive Officer
(CORPORATE SEAL)
<PAGE>
45
JOINDER OF SHAREHOLDERS
The undersigned ERC Shareholders join in and execute the
foregoing Agreement for the purposes which expressly apply to such ERC
Shareholders as set forth in the Agreement.
/s/ R. Perry Harris
- --------------------
R. Perry Harris
/s/ Karen Harris
- ---------------------
Karen Harris
================================================================================
----------------------------------
STOCKHOLDERS' AGREEMENT
----------------------------------
Between
EQUIVEST FINANCE, INC.
and
R. PERRY HARRIS AND KAREN HARRIS
Dated as of August 24, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms..........................................3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
SECTION 2.01. Capacity of the Stockholder....................................5
SECTION 2.02. Securities Act.................................................5
SECTION 2.03. Lock-up Agreement..............................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
SECTION 3.01. Due Organization; Corporate Power and Authorization............7
SECTION 3.02. No Conflicts; Required Filings and Consents....................7
ARTICLE IV
TRANSFER OF SHARES
SECTION 4.01. General Restriction............................................8
SECTION 4.02. Legends........................................................8
SECTION 4.03. Certain Information............................................9
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.01. Registration Upon Request......................................9
SECTION 5.02. Incidental Registration.......................................12
SECTION 5.03. Registration Procedures.......................................13
SECTION 5.04. Transfer of Registration Rights...............................18
SECTION 5.05. Preparation; Reasonable Investigation.........................18
SECTION 5.06. Indemnification...............................................18
SECTION 5.07. Contribution..................................................20
i
<PAGE>
Page
ARTICLE VI
CORPORATE GOVERNANCE
SECTION 6.01. Initial Board Representation..................................22
SECTION 6.02 Continuing Board Representation................................22
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Expenses......................................................23
SECTION 7.02. Notices.......................................................23
SECTION 7.03. Amendment.....................................................25
SECTION 7.04. Severability..................................................25
SECTION 7.05. Entire Agreement; Assignment..................................25
SECTION 7.06. Parties in Interest...........................................25
SECTION 7.07. Specific Performance..........................................25
SECTION 7.08. Public Announcements..........................................26
SECTION 7.09. Governing Law.................................................26
SECTION 7.10. Consent to Jurisdiction.......................................26
SECTION 7.11. Headings......................................................26
SECTION 7.12. Counterparts..................................................26
SECTION 7.13. Termination....................................................26
EXHIBIT A
ii
<PAGE>
STOCKHOLDERS' AGREEMENT (this "Agreement") dated as of August
24, 1998 between EQUIVEST FINANCE, INC., a Florida corporation (the "Company"),
and R. Perry Harris and Karen Harris (the "Original Stockholders").
WHEREAS, the Company, ERC ACQUISITION CORP., a Delaware
corporation and a wholly owned subsidiary of the Company ("Merger Sub"), and
Eastern Resorts Corporation, a Rhode Island corporation ("ERC"), have entered
into an Agreement and Plan of Merger dated as of July 16, 1998 (the "Merger
Agreement"), which provides, upon the terms and subject to the conditions set
forth therein, for the merger of ERC with and into Merger Sub (the "Merger"),
with Merger Sub as the surviving corporation (the "Surviving Corporation");
WHEREAS, following the consummation of the Merger, each
Original Stockholder will own (beneficially or of record) the number of shares
of common stock, par value $0.05 per share, of the Company ("Company Common
Stock") set forth opposite such Original Stockholder's name on Exhibit A hereto;
and
WHEREAS, it is a condition to the obligations of the parties
under the Merger Agreement that the parties hereto enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms have the following meanings:
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Bennett Stockholders" means, collectively, Bennett Management
and Development Corporation and Bennett Funding Group, Inc.
"Board of Directors" has the meaning set forth in Section
6.01.
"Commission" means the Securities and Exchange Commission, and
any successor commission or agency having similar powers.
"Company" has the meaning set forth in the preamble to this
Agreement.
<PAGE>
2
"Company Common Stock" has the meaning set forth in the
recitals to this Agreement.
"Company Securities" has the meaning set forth in Section
5.02(a)(ii).
"control" (including the terms "controlled by" and "under
common control with"), with respect to the relationship between or among two or
more Persons, means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise.
"Delay Notice" has the meaning set forth in Section
5.01(a)(ii)(E).
"Disadvantageous Condition" has the meaning set forth in
Section 5.01(a)(ii)(E).
"Encumbrance" means any pledge, lien, security interest,
mortgage, charge, claim, equity, option, proxy, voting restriction, right of
first refusal, limitation on disposition, adverse claim of ownership or use or
other encumbrance of any kind.
"ERC" has the meaning set forth in the recitals to this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Group" has the meaning comprehended by Section 13(d)(3) of
the Exchange Act and Rule 13d-5 thereunder.
"Initial Shares" has the meaning set forth in Section 5.03(e).
"Merger" has the meaning set forth in the recitals to this
Agreement.
"Merger Agreement" has the meaning set forth in the recitals
to this Agreement.
"Merger Sub" has the meaning set forth in the recitals to this
Agreement.
"NASD" means the National Association of Securities Dealers,
Inc.
"NASDAQ" means the NASDAQ Small Capitalization Market.
"Nominating Committee" has the meaning set forth in Section
6.02(b).
<PAGE>
3
"1998 Offering" means the first offering by the Company or the
bankruptcy estate for The Bennett Funding Group, Inc., Bennett Management &
Development Corp., and certain other related debtors of Company Common Stock
registered with the Commission commencing after the date hereof, other than any
offering registered on Form S-4, Form S-8 or pursuant to any dividend
reinvestment plan.
"Offered Shares" means up to 1,500,000 shares of Company
Common Stock to be sold by one or both of the Original Stockholders in the 1998
Offering.
"Option Shares" has the meaning set forth in Section 5.03(e).
"Original Stockholders" has the meaning set forth in the
preamble to this Agreement.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization, joint venture or other entity,
as well as any syndicate or group that would be deemed to be a person under
Section 13(d)(3) of the Exchange Act.
"Public Company" has the meaning set forth in Section 4.03(b).
"Recapitalization" means any stock split, dividend,
distribution or combination, or any recapitalization, merger, consolidation,
exchange, partial or complete liquidation or other similar reorganization or
transaction of, or with respect to, the capital stock of the Company.
"Registrable Securities" means all Shares held by
Stockholders; provided, however, that the Shares shall cease to be Registrable
Securities when and to the extent that (a) a registration statement with respect
to such Shares shall have been declared effective under the Securities Act and,
if such registration statement is not a "shelf" registration statement under
Rule 415 under the Securities Act, such Shares shall have been disposed of
pursuant to such registration statement, (b) such Shares shall have been sold to
the public pursuant to Rule 144, or are eligible for sale to the public without
volume or manner of sale restrictions under, Rule 144(k), (c) such Shares shall
have been otherwise transferred and new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company or
(d) such Shares shall have ceased to be outstanding.
"Registration Expenses" means all out-of-pocket expenses
incident to the Company's performance of or compliance with Article V,
including, without limitation, all registration and filing fees (including
filing fees with respect to the NASD), all fees and expenses of complying with
state securities or "blue sky" laws (including reasonable fees and disbursements
of underwriters' counsel in connection with such compliance and the preparation
<PAGE>
4
of any "blue sky" memoranda or surveys), all printing expenses, all listing
fees, all registrars' and transfer agents' fees, the fees and disbursements of
counsel for the Company and of its independent public accountants, including,
without limitation, the expenses of any audits and/or "cold comfort" letters
required by or incident to such performance and compliance, and the reasonable
fees and disbursements of one outside counsel retained by the holders of a
majority of the Registrable Securities being registered (which shall be the only
counsel retained by the Stockholders with respect to any registration and which
counsel shall be reasonably satisfactory to the Company), but excluding
underwriting discounts and commissions and applicable transfer taxes, if any.
"Restricted Shares" means all Shares other than (a) Shares
that have been registered under a registration statement pursuant to the
Securities Act, (b) Shares with respect to which a Sale has been made in
reliance on and in accordance with Rule 144 or (c) Shares with respect to which
the holder thereof shall have delivered to the Company either (i) an opinion, in
form and substance reasonably satisfactory to the Company, of counsel, who shall
be reasonably satisfactory to the Company, or (ii) a "no action" letter from the
staff of the Commission, in either case to the effect that subsequent transfers
of such Shares may be effected without registration under the Securities Act or
compliance with Rule 144.
"Rule 144" means Rule 144 (or any successor provision) under
the Securities Act.
"Sale" means any sale, assignment, transfer, distribution or
other disposition of Shares or of a participation therein, whether voluntarily
or by operation of law.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Securities Sales Agreement" has the meaning set forth in
Section 2.03(c).
"Share" means any share of Company Common Stock issued
pursuant to the Merger Agreement and any securities issued in respect thereof,
or in substitution therefor, in connection with any Recapitalization.
"Stockholders" means the Original Stockholders and any Person
to whom they transfer some or all of their Registrable Securities.
"Surviving Corporation" has the meaning set forth in the
Recitals.
<PAGE>
5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
Each Stockholder, severally and not jointly, hereby represents
and warrants to the Company as follows:
SECTION 2.01. Capacity of the Stockholder. Such Stockholder is
an individual and has all necessary right, capacity and power to enter into this
Agreement, to carry out his or her obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by such Stockholder, and (assuming due authorization, execution and
delivery by the Company) this Agreement constitutes a legal, valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms.
SECTION 2.02. Securities Act. The Shares to be issued to such
Stockholder pursuant to the Merger Agreement are being acquired for investment
only and not with a view to any sale or distribution of the Shares or any part
thereof in violation of the Securities Act. Such Stockholder agrees at all times
to sell or otherwise dispose of all or any part of the Shares so acquired by
such Stockholder only pursuant to a registration, or exemption therefrom, under
the Securities Act and in compliance with applicable state securities laws. Such
Stockholder is an "accredited investor" within the meaning of Rule 501
promulgated under the Securities Act and has such knowledge and experience, or
has consulted with persons having knowledge and experience, in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Shares. Such Stockholder has received all the information that
such Stockholder deems material to his or her evaluation of the business,
assets, liabilities, financial condition and results of operations of the
Company and all the information that such Stockholder has requested from the
Company and considers necessary or appropriate for deciding whether to purchase
the Shares. Such Stockholder has the ability to bear the economic risks of such
Stockholder's prospective investment and such Stockholder is able, without
materially impairing such financial condition, to hold the Shares for an
indefinite period of time and to suffer complete loss on such Stockholder's
investment, in the event such a loss should occur. Such Stockholder understands
and has fully considered for purposes of this investment the risks of this
investment and understands that (a) this investment is suitable only for an
investor who is able to bear the economic consequences of losing his or her
entire investment, in the event such a loss should occur; (b) the Shares
represent a speculative investment that involves a high degree of risk of loss
under certain circumstances; (c) there are substantial restrictions on the
transferability of the Shares and, accordingly, it may not be possible for such
Stockholder to liquidate his or her investment in the Shares in case of
emergency; and (d) there have been no representations as to the possible future
value, if any,
<PAGE>
6
of the Shares. Each Stockholder understands and acknowledges that the Shares
will not be registered under the Securities Act on the ground that the offering
and sale of securities contemplated by the Merger Agreement are exempt from
registration pursuant to Section 4(2) of the Securities Act, and that the
Company's reliance upon such exemption is predicated in part upon such
Stockholder's representations set forth in this Agreement.
SECTION 2.03. Lock-up Agreement. (a) Commencing on the date
hereof and continuing for a period expiring on the first anniversary hereof,
each Stockholder shall not, directly or indirectly, offer for sale, sell or
otherwise dispose of (or enter into any transaction or device that is designed
to, or could be expected to, result in the disposition by any person at any time
in the future of), or reduce his or her risk with respect to, any shares of
Company Common Stock (other than the Offered Shares) or sell or grant options,
rights or warrants with respect to any shares of Company Common Stock, without
the consent of the Company. Such Stockholder agrees to provide, upon request,
written confirmation of this agreement to the underwriters of the 1998 Offering.
The restriction contained in this Section 2.03(a) (but not any restriction
imposed by Section 2.03(b)) shall terminate in the event that R. Perry Harris is
no longer an officer or director of the Company or any of its Subsidiaries.
(b) Each Stockholder agrees, if so required by the managing
underwriter in connection with any underwritten offering of shares of the
Company Common Stock (including the 1998 Offering and any registration pursuant
to Section 5.01 or 5.02) not to, directly or indirectly, offer for sale, sell or
otherwise dispose of (or enter into any transaction or device that is designed
to, or could be expected to, result in the disposition by any person at any time
in the future of) any shares of Company Common Stock or sell or grant options,
rights or warrants with respect to any shares of Company Common Stock during the
7 days prior to and the 120 days after the effective date of any registration
statement with respect to such underwritten public offering; provided, however,
with respect to the 1998 Offering, the Original Stockholders agree to be
restricted for a period ending 180 days after the effective date of the
registration statement for the 1998 Offering. Such Stockholder agrees to
provide, upon request, written confirmation of this agreement to the
underwriters of any such underwritten offering. The obligation of each
Stockholder to agree to such a restriction shall terminate at such time as the
Stockholders as a group own less than 5% of the issued and outstanding Company
Common Stock and R. Perry Harris is no longer an officer or director of the
Company or any of its Subsidiaries.
(c) The Company agrees, if so required by the managing
underwriter in connection with an underwritten offering of shares of the Company
Common Stock pursuant to Section 5.01 or 5.02 or, if requested by a Stockholder
in connection with a securities sales agreement entered into with any
representative of such Stockholder for the purposes of soliciting purchases of
Registrable Securities (a "Securities Sales Agreement") pursuant to any
registration under Section 5.01 or 5.02, to use its reasonable efforts to cause
each of its officers, directors and
<PAGE>
7
holders of more than 5% of the issued and outstanding Company Common Stock not
to, directly or indirectly, offer for sale, sell, or otherwise dispose of (or
enter into any transaction or device that is designed to, or could be expected
to, result in any disposition by any person at any time in the future of) any
shares of Company Common Stock during the 7 days prior to and the 120 days after
the effective date of any registration statement with respect to such
underwritten public offering or Securities Sales Agreement. The Company agrees
to provide, upon request, written confirmation of agreements by its officers,
directors and 5% shareholders to abide by the terms hereof, assuming the Company
was able to cause such agreements as provided in the previous sentence.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby represents and warrants to each Stockholder
as follows:
SECTION 3.01. Due Organization; Corporate Power and
Authorization. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by the Company have been duly authorized by all necessary corporate
action on the part of the Company. This Agreement has been duly executed and
delivered by the Company and, assuming its due authorization, execution and
delivery by each Stockholder, constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium and other similar laws
relating to creditors' rights and general principles of equity.
SECTION 3.02. No Conflicts; Required Filings and Consents. (a)
The execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Articles of Incorporation or By-Laws of the Company, (ii) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to the Company or by which it or any of its properties is bound, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of the
Company pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any of its properties is bound,
except, in the case of clauses (ii) and (iii), for any such breaches, defaults
or other
<PAGE>
8
occurrences that would not prevent or delay the performance by the Company of
its obligations under this Agreement.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or foreign,
except (i) for such filings with the Commission, the NASD and any state
securities regulators required in connection with any public offering of
Registrable Securities and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay the performance by the Company of its obligations
under this Agreement.
ARTICLE IV
TRANSFER OF SHARES
SECTION 4.01. General Restriction. No Stockholder shall,
directly or indirectly, make or solicit any Sale of, or create, incur, solicit
or assume any Encumbrance with respect to, any Share, except in compliance with
the Securities Act and this Agreement.
SECTION 4.02. Legends. (a) The Company shall affix to each certificate
evidencing Shares a legend in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON
THE BOOKS OF THE ISSUER UNLESS SUCH TRANSFER IS MADE IN
CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN A
STOCKHOLDERS' AGREEMENT DATED AS OF AUGUST 24, 1998, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
ISSUER. NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE
MADE ON THE BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH
RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH."
<PAGE>
9
(b) In the event that any Shares shall cease to be Restricted
Shares, the Company shall, upon the written request of the holder thereof
(accompanied by an opinion, in form and substance reasonably satisfactory to the
Company, from legal counsel reasonably satisfactory to the Company, that such
Shares are no longer Restricted Shares), issue to such holder a new certificate
evidencing such Shares without the legend required by Section 4.02(a) endorsed
thereon.
SECTION 4.03. Certain Information. (a) So long as the Company
shall be a Public Company, it shall file in a timely manner all reports and
other information required to be filed by Section 13 or 15(d) under the Exchange
Act, as the case may be, and take such other actions as shall be reasonably
necessary in order that the conditions to the availability of Rule 144 in
connection with any Sale of Shares by a Stockholder shall be met.
(b) For purposes of this Agreement, the Company shall be
deemed to be a "Public Company" if, as of any date of determination, any shares
of the Company's capital stock are registered or required to be registered under
the Exchange Act.
ARTICLE V
REGISTRATION RIGHTS
SECTION 5.01. Registration Upon Request. (a) Upon the written
request of the holder or holders of Registrable Securities requesting that the
Company effect the registration under the Securities Act of all or part of the
Registrable Securities held by such holder or holders and specifying the
intended method or methods of disposition of such Registrable Securities, the
Company shall promptly give written notice of such requested registration to all
holders of Registrable Securities and thereupon shall use its best efforts to
effect the registration under the Securities Act, as expeditiously as is
reasonable, of:
(i) the Registrable Securities that the Company has been so
requested to register by such holder or holders, for disposition in
accordance with the intended method of disposition stated in such
request, and
(ii) all other Registrable Securities that the Company has
been requested to register by the holders of Registrable Securities by
written request delivered to the Company within 15 days after the
giving of such written notice by the Company (which request shall
specify the intended method of disposition of such Registrable
Securities), all to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the
Registrable Securities so to be registered; provided, however, that:
<PAGE>
10
(A) the Company shall not be required to effect any
registration pursuant to this Section 5.01 unless at the time of such
request it shall then be a Public Company;
(B) the Company shall not be required to effect any
registration pursuant to this Section 5.01 prior to the first
anniversary of the date hereof;
(C) the Company shall not at any time be required to effect
any registration pursuant to this Section 5.01 unless the requests from
holders of Registrable Securities for such registration cover an
aggregate number of shares of Registrable Securities at least equal to
20% of the outstanding shares of Company Common Stock issued as
consideration pursuant to the Merger Agreement;
(D) if the Company has effected a registration pursuant to
this Section 5.01, the Company shall not be required to effect another
registration pursuant to this Section 5.01 until a period of 12 months
shall have elapsed from the effective date of the initial registration
pursuant to this Section 5.01; and
(E) with respect to any registration statement filed, or to be
filed, pursuant to this Section 5.01, if the Board of Directors of the
Company determines that, in its judgment, it would (because of the
existence of, or in anticipation of, any material acquisition involving
the Company or any of its subsidiaries or any material financing
activity, or the unavailability for reasons substantially beyond the
Company's control of any required financial statements, or any other
event or condition the disclosure of which would, in the reasonable
opinion of the Board of Directors of the Company,(1) be materially
disadvantageous to the Company or any of its subsidiaries taken as a
whole or (2) jeopardize the consummation of any such acquisition or
financing activity) be significantly disadvantageous (a
"Disadvantageous Condition") for such a registration statement to
become effective, or to be maintained effective, the Company shall,
notwithstanding any other provision of this Article V, be entitled,
upon the giving of a written notice (a "Delay Notice") to such effect
to each holder of Registrable Securities included or to be included in
such registration statement, to cause such registration statement to be
withdrawn and the effectiveness of such registration statement
terminated or, in the event no registration statement has yet been
filed, shall be entitled not to file any such registration statement,
until, in the judgment of the Board of Directors of the Company, such
Disadvantageous Condition no longer exists (notice of which the Company
shall promptly deliver to the holders of Registrable Securities with
respect to which any such registration statement has been filed, or was
to have been filed); provided, however, that in no event shall the
Company be permitted to delay registration pursuant to this Section (i)
for a period exceeding 120 consecutive days or (ii) during any 12 month
period of time following the termination of any delay period; and
provided, further, that a holder of Registrable Securities may withdraw
any
<PAGE>
11
registration request made under this Section 5.01 in the event that
such request is delayed as permitted by the preceding clause for a
period exceeding 45 days, in which event the registration request will
not count for purposes of the limit set forth in paragraph (b) of this
Section 5.01. Upon receipt of any notice of the existence of a
Disadvantageous Condition, such holders of Registrable Securities
selling such securities pursuant to an effective registration statement
shall forthwith discontinue use of the prospectus contained in such
registration statement and, if so directed by the Company, each such
holder of Registrable Securities shall deliver to the Company all
copies, other than permanent file copies then in such holder's
possession, of the prospectus then covering such Registrable Securities
current at the time of receipt of such notice, and, in the event that
no registration statement has yet been filed, all drafts of the
prospectus covering such Registrable Securities. Notwithstanding the
foregoing provisions of this subparagraph (E), no registration
statement filed and subsequently withdrawn by reason of any existing or
anticipated Disadvantageous Condition as hereinabove provided shall
count as the registration statement referred to in the limitation in
Section 5.01(b), or count against the limitations in Section
5.01(a)(ii)(E).
(b) Anything herein to the contrary notwithstanding, the
Company shall not be obligated to file more than two effective registration
statements pursuant to this Section 5.01, each of which shall allow for the
distribution of Registrable Securities for at least 90 days and both of which
must occur within three years from the date hereof; provided, however, that such
three years will be extended for that amount of time that one or more
registration statement are delayed pursuant to Section 5.01(a)(ii)(E). In the
event a registration statement under this Section 5.01 does not remain effective
for a period of 90 days or for such lesser period of time necessary to permit
the distribution of all of the Registrable Securities registered pursuant to a
holder's request, then the request shall not count for purposes of the limit set
forth in this paragraph (b).
(c) The Company shall pay all Registration Expenses in
connection with the registration of Registrable Securities effected by it
pursuant to this Section 5.01.
(d) In connection with any underwritten offering with respect
to which holders of Registrable Securities shall have requested registration
pursuant to this Section 5.01, such holders shall have the right to select the
managing underwriter with respect to such offering; provided, however, if such
holders select as managing underwriter any institution other than Salomon Smith
Barney, Credit Suisse First Boston Corporation, Merrill Lynch & Co. or Morgan
Stanley & Co. Incorporated then such selection of managing underwriter shall
require the consent of the Company, which shall not be unreasonably withheld.
SECTION 5.02. Incidental Registration. (a) If the Company at
any time proposes to register (other than pursuant to Section 5.01) any of its
authorized but unissued
<PAGE>
12
shares of Company Common Stock or any other shares of Company Common Stock under
the Securities Act on a form other than Form S-4, Form S-8 or pursuant to any
dividend reinvestment plan and in a manner that would permit registration of
Registrable Securities for sale to the public under the Securities Act, it
shall, on each such occasion (including the occasion of the registration
effected in connection with the 1998 Offering), give prompt written notice to
all holders of Registrable Securities of its intention to do so, describing such
securities and specifying the form and manner and the other relevant facts
involved in such proposed registration (including, without limitation, whether
or not such registration will be in connection with an underwritten offering of
Company Common Stock and, if so, the identity of the managing underwriter and
whether such offering will be pursuant to a "best efforts" or "firm commitment"
underwriting). Upon the written request of any such holder of Registrable
Securities delivered to the Company within 15 days after such notice shall have
been given to such holder (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method of
disposition thereof), the Company shall use its best efforts to effect the
registration under the Securities Act, as expeditiously as is reasonable, of all
Registrable Securities that the Company has been so requested to register by the
holders of Registrable Securities, to the extent required to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities so to be registered; provided, however, that:
(i) if, at any time after giving such written notice of its
intention to register any of such securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
register such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable
Securities that has requested to register Registrable Securities and
thereupon the Company shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith to the extent provided in Section 5.02(b)), without
prejudice, however, to the rights of any one or more holders to request
such registration be effected as a registration under Section 5.01;
(ii) if (A) the registration so proposed by the Company
involves an underwritten offering of the securities so to be
registered, to be distributed by or through one or more underwriters of
recognized standing under underwriting terms appropriate for such a
transaction, and (B) the managing underwriter of such underwritten
offering selected by the Company shall advise the Company that, in its
judgment, the number of securities proposed to be included in such
offering by the Company (for purposes of this Section 5.02(a), "Company
Securities") and the number of shares of Registrable Securities
proposed to be included in such offering by the holder or holders
thereof should be limited due to market conditions, then the Company
<PAGE>
13
shall promptly advise each such holder of Registrable Securities
thereof and may require, by written notice to each such holder
accompanying such advice, that, to the extent necessary to meet such
limitation, all holders of Registrable Securities proposing to sell
shares of Registrable Securities in such offering shall share pro rata
in the number of shares of Registrable Securities to be excluded from
such offering, such sharing to be based on the respective numbers of
shares of Registrable Securities as to which registration has been
requested by such holders, and that the distribution of such
Registrable Securities as are so excluded be deferred (in case of a
deferral as to a portion of such Registrable Securities, such portion
to be allocated among such holders in proportion to the respective
numbers of shares of Registrable Securities so requested to be
registered by such holders) until the completion of the distribution of
such securities by such underwriters, provided, however, that
Registrable Securities shall, if requested by the Stockholders,
constitute a minimum of 20% of the total amount of shares of Company
Common Stock to be sold in any offering;
(iii) the Company shall not be obligated to effect any
registration of Registrable Securities under this Section 5.02 that is
incidental to the registration of any of its securities in connection
with any merger, acquisition, exchange offer, dividend reinvestment
plan or stock option or other employee benefit plan;
(iv) with respect to the 1998 Offering, only an Original
Stockholder may include its Registrable Securities in such offering,
subject to the other limitations of this Agreement, and the Company
shall not be obligated to effect the registration of more than
1,500,000 Registrable Securities of any Original Stockholder pursuant
to this Section 5.02.
No registration of Registrable Securities effected under this Section 5.02 shall
relieve the Company of its obligation to effect registrations of Registrable
Securities upon the request of one or more holders pursuant to Section 5.01.
(b) There shall be no registration obligation pursuant to this
Section 5.02 with respect to shares of Company Common Stock that are not
Registrable Securities.
(c) The Company shall pay all Registration Expenses in
connection with each registration of Registrable Securities effected by it
pursuant to this Section 5.02.
SECTION 5.03. Registration Procedures. (a) If and whenever the
Company is required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 5.01 or
5.02, the Company shall:
<PAGE>
14
(i) within 60 days after receiving the written request of the
holder or holders of Registrable Securities pursuant to Section 5.01(a)
or 5.02(a) (or 45 days if the Company is eligible to file such
registration statement on Form S-3), prepare and file with the
Commission on any appropriate form a registration statement with
respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective;
(ii) prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities and other securities covered
by such registration statement until the earlier of (A) such time as
all such Registrable Securities and other securities have been disposed
of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement and (B) the
expiration of 90 days from the date such registration statement first
becomes effective;
(iii) furnish to each seller of such Registrable Securities
such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any
summary prospectus), in conformity with the requirements of the
Securities Act, such documents incorporated by reference in such
registration statement or prospectus, and such other documents as such
seller may reasonably request in order to facilitate the sale or
disposition of such Registrable Securities;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or "blue sky" laws
of such jurisdictions as each seller shall reasonably request, and do
any and all other acts and things that may be necessary to enable such
seller to consummate the disposition in such jurisdictions of its
Registrable Securities covered by such registration statement, except
that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in
respect of doing business in any such jurisdiction, or to consent to
general service of process in any such jurisdiction;
(v) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller, of a "cold comfort" letter
signed by the independent public accountants who have issued a report
on the Company's financial statements included in
<PAGE>
15
such registration statement, covering substantially the same matters
with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants' letter, with
respect to events subsequent to the date of such financial statements,
as are customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to underwriters in underwritten public
offerings of securities and, in the case of the accountants' letter,
such other financial matters as such sellers may reasonably request;
(vi) immediately notify each seller of Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing
or if it is necessary to amend or supplement such prospectus to comply
with law, and at the request of any such seller prepare and furnish to
such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities or
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing and shall otherwise comply
in all material respects with law and so that such prospectus, as
amended or supplemented, will comply with law;
(vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least 12 months, beginning with the
first month of the first fiscal quarter after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act;
(viii) use its best efforts to list such securities on each
securities exchange or automated quotation system on which Shares are
then listed, if such securities are not already so listed and if such
listing is then permitted under the rules of such exchange, and provide
a transfer agent and registrar for such Registrable Securities not
later than the effective date of such registration statement; and
(ix) issue to any underwriter to which any holder of
Registrable Securities may sell such Registrable Securities in
connection with any such registration (and to any direct or indirect
transferee of any such underwriter) certificates evidencing Shares
without the legends described in Section 4.02.
<PAGE>
16
(x) furnish counsel for the sole underwriter or lead managing
underwriter, if any, and for the holders of Registrable Securities
copies of any request by the Commission or any state securities
authority for amendments or supplements to a registration statement and
prospectus or for additional information:
(xi) use all reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of a registration statement at
the earliest possible time;
(xii) upon request, furnish to the sole underwriter or lead
managing underwriter of an underwritten offering of Registrable
Securities, if any, without charge, at least one signed copy of each
registration statement and any post-effective amendment thereto,
including financial statements and schedules, all documents
incorporated therein by reference and all exhibits; and furnish to each
holder of Registrable Securities, without charge, at least one
conformed copy of each registration statement and any post-effective
amendment thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(xiii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the lead managing underwriter, if
any, and the holders of the Registrable Securities being sold)
addressed to each selling holder covering the matters customarily
covered in opinions requested in sales of securities or underwritten
offerings and such other matters as may be reasonably requested by such
holders and underwriters;
(xiv) deliver such customary documents and certificates as may
be reasonably requested by any holders of the Registrable Securities
being sold or by the managing underwriters, if any;
(xv) within a reasonable time prior to the filing of any
registration statement, any prospectus, any amendment to a registration
statement or amendment or supplement to a prospectus, provide copies of
such document to the holders of Registrable Securities and to counsel
to such holders and to the underwriter or underwriters of any
underwritten offering of Registrable Securities, if any;
(xvi) within a reasonable time prior to the filing of any
document which is to be incorporated by reference into a registration
statement or a prospectus, provide copies of such document to counsel
for the holders; and make such of the representatives of the Company as
shall be reasonably requested by such counsel available for discussion
of such document; and
<PAGE>
17
(xvii) make "road show" presentations and hold meetings with
potential investors, each at the Company's expense, and take such other
actions as shall be reasonably requested by the holders of Registrable
Securities covered by a registration statement.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company with such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
or by the Commission in connection therewith.
(b) If requested by the underwriters for any underwritten
offering of Registrable Securities on behalf of a holder or holders of
Registrable Securities pursuant to a registration requested under Section 5.01,
the Company shall enter into an underwriting agreement with such underwriters
for such offering, such agreement to contain such representations and warranties
by the Company and such other terms and conditions as are customarily contained
in underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities to the effect and to the extent provided in
Section 5.06.
(c) To the extent requested and customary for the relevant
transaction, the Company shall enter into a Securities Sales Agreement with the
holders and such representative of the selling holders as holders of the
Registrable Securities covered by any Registration Statement shall choose and
providing for, among other things, the appointment of such representative as
agent for the selling holders for the purpose of soliciting purchases of
Registrable Securities, which agreement shall be customary in form, substance
and scope and shall contain customary representations, warranties and covenants.
(d) The Company agrees, if so required by the managing
underwriters in connection with an underwritten offering of Registrable
Securities pursuant to Section 5.01 or 5.02, not to effect any public sale or
distribution of any of its equity securities or securities convertible into or
exchangeable or exercisable for any of such equity securities during the 7 days
prior to and the 60 days after the effective date of any registration statement
with respect to such underwritten public offering, except as part of such
underwritten offering or except in connection with a stock option plan, stock
purchase plan, dividend reinvestment plan, savings or similar plan, or an
acquisition, merger or exchange offer or an offering pursuant to an exemption
from registration under the Securities Act.
(e) It is understood that in any underwritten offering of
Registrable Securities, in addition to the shares of Company Common Stock (the
"Initial Shares") the underwriters have committed to purchase, the underwriting
agreement may grant the underwriters an option to purchase a number of
additional shares (the "Option Shares") equal
<PAGE>
18
to up to 15% of the Initial Shares (or such other maximum amount as the NASD may
then permit), to cover over-allotments. Nothing herein shall obligate the
Company to provide the underwriters such an option. Shares of Company Common
Stock proposed to be sold by the Company and the holders shall be allocated
between Initial Shares and Option Shares as agreed or, in the absence of
agreement, pursuant to Section 5.02(a)(ii). The number of Initial Shares and
Option Shares to be sold by requesting holders shall be allocated pro rata among
all such holders on the basis of the relative number of Registrable Securities
each such holder has requested to be included in such registration.
SECTION 5.04. Transfer of Registration Rights. The
registration rights of the Stockholders under this Agreement with respect to any
Registrable Securities (but no other rights under this Agreement) may be
transferred to any transferee of such Registrable Securities who acquires at
least 20% of such Stockholder's shares of Registrable Securities in a
transaction which does not cause such Registrable Securities to cease to be
Restricted Securities; provided, however, that (a) transferring Stockholders
shall give the Company written notice at or prior to the time of such transfer
stating the name and address of the transferee and identifying the securities
with respect to which the rights under this Agreement are being transferred and
(b) such transferee shall agree in writing, in form and substance reasonably
satisfactory to the Company, to be bound as a Stockholder by the provisions of
this Agreement. Any transferee of Registrable Securities shall be entitled only
to such registration rights as have not been exercised by the holder or holders
of Registrable Securities prior to the time that such transferee acquired such
Registrable Securities.
SECTION 5.05. Preparation; Reasonable Investigation. In
connection with the preparation and filing of each registration statement
registering Registrable Securities under the Securities Act, the Company shall
give the holders of Registrable Securities on whose behalf such Registrable
Securities are to be so registered and their underwriters, if any, and their
respective counsel and accountants the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
shall give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have issued a report on its financial
statements as shall be necessary, in the opinion of such holders and such
underwriters or their respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
SECTION 5.06. Indemnification. (a) In the event of any
registration of any equity securities of the Company under the Securities Act,
the Company shall, and hereby does, to the fullest extent permitted by law,
indemnify and hold harmless, in the case of any registration statement filed
pursuant to Section 5.01 or 5.02 (including in connection with the 1998
Offering), the prospective seller of any Registrable Securities covered by such
registration statement, its directors and officers, general and limited partners
(and directors and
<PAGE>
19
officers thereof and, if such prospective seller is a portfolio or investment
fund, its investment advisors), each other Person who participates as an
underwriter in the offering or sale of such securities, each officer and
director of each such underwriter and each other Person, if any, who controls
such prospective seller or any such underwriter within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, against any losses,
claims, damages, liabilities and expenses, joint or several, to which such
prospective seller or any such director, officer, partner, advisor or
participating or controlling Person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus included therein, or any amendment or
supplement thereto, or any document incorporated by reference therein, or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company shall reimburse such seller, and each such director, officer,
partner, advisor, underwriter and controlling Person for any legal or any other
expenses reasonably incurred by them in connection with investigating, preparing
or defending against any such loss, claim, liability, action or proceeding,
whether commenced or threatened; provided, however, that the Company shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with (i) information concerning ERC, Eastern
Resorts Company, LLC or the Original Stockholders at any point prior to the
Closing Date; provided that the Original Stockholders shall have been provided
with copies of such document reasonably in advance of, but in no event less than
5 business days prior to, the filing thereof, and the Company shall have made
such changes as reasonably requested by the Original Stockholders or (ii)
written information furnished to the Company for use in the preparation thereof
by such prospective seller or underwriter, as the case may be. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such prospective seller or any such director, officer, partner,
advisor, underwriter or controlling Person and shall survive the transfer of
such securities by such prospective seller.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed pursuant to Section
5.01 or 5.02, that the Company shall have received an undertaking satisfactory
to it from (i) the prospective seller of such securities, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section
5.05(a), except that any such prospective seller shall not in any event be
liable to the Company pursuant thereto for an amount in excess of the net
proceeds of sale of such prospective seller's Registrable Securities so to be
sold) the Company, each officer and
<PAGE>
20
director of the Company, each such underwriter of such securities, each officer
and director of each such underwriter and each other Person, if any, who
controls the Company or any such underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, and (ii) each such
underwriter of such securities, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 5.05(a)) the Company, each
officer and director of the Company, each prospective seller, its directors and
officers, general and limited partners (and directors and officers thereof and,
if such prospective seller is a portfolio or investment fund, its investment
advisors), and each other Person, if any, who controls the Company or any such
prospective seller within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, with respect to any statement in or omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement thereto,
if such statement or omission was made in reliance upon and in conformity with
written information furnished by such prospective seller or such underwriter, as
the case may be, to the Company for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling Person and shall survive the transfer of such
securities by such prospective seller.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action or proceeding (including any governmental
investigation) involving a claim referred to in Section 5.05(a) or (b), such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding provisions of this Section 5.05, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim (in which case, the indemnifying party shall not be liable for the fees
and expenses of more than one counsel (other than local counsel) for all sellers
of Registrable Securities, or more than one counsel (other than local counsel)
for the underwriters in connection with any one action or separate but similar
or related actions), the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party
similarly notified, to the extent that it may wish with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof.
<PAGE>
21
SECTION 5.07. Contribution. If the indemnification provided
for in Section 5.05 is unavailable to the indemnified party or parties in
respect of any losses, claims, damages or liabilities referred to therein, then
each such indemnified party and the Company shall contribute to the amount of
such losses, claims, damages or liabilities (a) as between the Company and the
holders of Registrable Securities covered by a registration statement, on the
one hand, and the underwriters, on the other, in such proportion as is
appropriate to reflect the relative benefits received by the Company and such
holders, on the one hand, and the underwriters, on the other, from the offering
of the Registrable Securities or, if such allocation is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits but also the relative fault of the Company and such holders,
on the one hand, and of the underwriters, on the other, in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations, and (b) as
between the Company, on the one hand, and each holder of Registrable Securities
covered by a registration statement, on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of each such holder
in connection with such statements or omissions, as well as any other relevant
equitable considerations. The relative benefits received by the Company and such
holders, on the one hand, and the underwriters, on the other, shall be deemed to
be in the same proportion as the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and such holders bear to the total underwriting discounts and
commissions received by the underwriters. The relative fault of the Company and
such holders, on the one hand, and of the underwriters, on the other, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company and such holders
or by the underwriters. The relative fault of the Company, on the one hand, and
of each such holder, on the other, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
relates to information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the holders of Registrable Securities agree
that it would not be just and equitable if contribution pursuant to this Section
5.07 were determined by pro rata allocation (even if the underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
next preceding paragraph. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages or liabilities referred to in the next
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.07, no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public
<PAGE>
22
were offered to the public exceeds the amount of any damages that such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no holder of
Registrable Securities shall be required to contribute any amount in excess of
the amount by which the total price at which the Registrable Securities of such
holder were offered to the public exceeds the amount of any damages that such
holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Each Stockholder's obligation to contribute
pursuant to this Section 5.06 is several in the proportion that the proceeds of
the offering received by such Stockholder bears to the total proceeds of the
offering received by all the Stockholders and not joint.
ARTICLE VI
CORPORATE GOVERNANCE
SECTION 6.01. Initial Board Representation. As of the fifth
business day following the Effective Time, the Company shall (a) take such
action as may be necessary to increase the size of the Board of Directors of the
Company (the "Board of Directors") to five directors, and (b) fill the vacancy
thereby created by appointing R. Perry Harris as a director.
SECTION 6.02 Continuing Board Representation. Until such time
as the Original Stockholders no longer beneficially own shares representing in
the aggregate at least 10% of the outstanding shares of Company Common Stock or
25% of the Original Stockholders initial holdings, if less, the Company
covenants and agrees as follows:
(a) except as contemplated by this Agreement, as otherwise
agreed to by the Stockholders, or required by applicable law or NASD rules, the
Company shall not take or recommend to its stockholders any action which would
result in any amendment to the ByLaws of the Company in effect on the date
hereof that would impose any qualifications to the eligibility of directors of
the Company to serve on any committee of the Board of Directors;
(b) the Company shall use its best efforts to cause the
Nominating Committee of the Board of Directors (the "Nominating Committee") (or
if the Nominating Committee makes no such recommendation, the Board of
Directors) to recommend R. Perry Harris for election as a director; provided,
however, that if despite such best efforts, Mr. Harris is not elected by the
stockholders of the Company, the Company shall have no further obligations under
this Section 6.02(b) for the applicable year.
<PAGE>
23
(c) Articles and By-laws; Fiduciary Duties. The obligations of
the Company set forth in this Section 6.02 are subject to compliance with the
provisions of the Company's Articles of Incorporation and the Company's By-laws,
and the fiduciary duties of the Board of Directors and the Nominating Committee
to the Company's stockholders.
(d) No Duty to Designate; Reduction of Board Representation.
Nothing contained in this Section 6.02 shall be construed as requiring the
Original Stockholders to designate any directors or, once designated and
elected, to require any director to continue to serve in office if such director
elects to resign.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Expenses. Except as otherwise provided herein,
all costs and expenses incurred in connection with the transactions contemplated
by this Agreement shall be paid by the party incurring such costs and expenses.
SECTION 7.02. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or facsimile, by registered or certified mail (postage prepaid, return
receipt requested) or nationally recognized overnight courier service to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
7.02):
if to the Company:
Richard C. Breeden
Chief Executive Officer
Equivest Finance, Inc.
100 Northfield Street
Greenwich, CT 06830
Facsimile No.: (203) 618-0063
with a copy to:
Eric C. Cotton, Esq.
General Counsel
Equivest Finance, Inc.
<PAGE>
24
Two Clinton Square
Syracuse, New York 13202
Facsimile No.: (315) 422-9477
if to a Stockholder:
R. Perry Harris
Eastern Resorts Company
115 Long Wharf
P.O. Box 2000
Newport, Rhode Island
<PAGE>
25
Facsimile No.: (401) 846-3888
with a copy to:
Stephen R. Goldstein, Esq.
Goldstein, Kaitz & Fellman, LLP
Watermill Center
800 South Street, Suite 380
Waltham, MA 02154
Facsimile No.: (781) 894-2129
SECTION 7.03. Amendment. (a) Any term of this Agreement may be
amended and the observance of any such term may be waived (either generally or
in a particular instance and either retroactively or prospectively) only by a
writing executed by the Company and each Stockholder.
(b) No failure or delay by any party in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other
<PAGE>
26
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 7.04. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of this Agreement is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the terms of this Agreement remain as originally contemplated to the
fullest extent possible.
SECTION 7.05. Entire Agreement; Assignment. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect thereto.
Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by operation of law or
otherwise), except that the Company may assign all or any of its rights and
obligations hereunder to any affiliate of the Company and subject to Section
5.04; provided, however, that no such assignment shall relieve the Company of
its obligations hereunder if such assignee does not perform such obligations.
SECTION 7.06. Parties in Interest. This Agreement shall be
binding upon and shall inure solely to the benefit of, and be enforceable by,
the parties hereto, the parties indemnified hereunder and their respective
successors and permitted assigns, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any person, other than the parties
hereto or their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities of any nature whatsoever under or by reason
of this Agreement.
SECTION 7.07. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 7.08. Public Announcements. Each party to this
Agreement shall use its reasonable best efforts to consult with the others
before issuing any press release or otherwise making any public statements with
respect to this Agreement or any transaction contemplated herein and shall not
issue any press release or make any such public statement prior to such
consultation.
<PAGE>
27
SECTION 7.09. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.
SECTION 7.10. Consent to Jurisdiction. (a) Each of the
Stockholders and the Company hereby irrevocably submits to the exclusive
jurisdiction of the state courts of the State of New York and to the
jurisdiction of the United States District Court for the Southern District of
New York, for the purpose of any action or proceeding arising out of or relating
to this Agreement and each of the Stockholders and the Company hereby
irrevocably agree that all claims in respect to such action or proceeding may be
heard and determined exclusively in any New York state or federal court sitting
in the Southern District of New York. Each of the Stockholders and the Company
agree that a final judgment in any action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
(b) Each of the Stockholders and the Company irrevocably
consent to the service of the summons and complaint and any other process in any
other action or proceeding relating to this Agreement, on behalf of itself or
its property, by the personal delivery of copies of such process to such party.
Nothing in this Section 7.10 shall affect the right of any party to serve legal
process in any other manner permitted by law.
SECTION 7.11. Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 7.12. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 7.13. Termination. This Agreement shall terminate with
respect to any Stockholder when such Stockholder no longer owns any shares of
Company Common Stock, and with respect to all parties hereto when the
Stockholders and their affiliates, as a group, no longer own any shares of
Company Common Stock.
<PAGE>
28
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its officer thereunto duly authorized and each Stockholder has
caused this Agreement to be executed, or duly executed by an authorized
signatory, as of the date first written above.
EQUIVEST FINANCE, INC
By /s/ Richard C. Breeden
-------------------------------------------
Name: Richard C. Breeden
Title: Chairman and Chief Executive Officer
/s/ R. Perry Harris
-------------------------------------------
R. Perry Harris
Address:
/s/ Karen Harris
-------------------------------------------
Karen Harris
Address:
<PAGE>
29
Exhibit A
Name of Original Stockholder Number of Shares
- ---------------------------- ----------------
R. Perry Harris 3,040,000
Karen Harris 160,000
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") dated as of August
24, 1998 (the "Effective Date"), between Eastern Resorts Corporation, a Delaware
corporation (the "Company"), and R. Perry Harris, a resident of Newport, Rhode
Island (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company wishes to assure itself of the continued
services of the Executive so that it will have the benefit of his ability,
experience and services, and the Executive is willing to enter into an agreement
to that end, upon the terms and conditions hereinafter set forth; and
WHEREAS, it is hereby acknowledged that the covenants not to
compete, detailed in Section 10(b) of this Agreement, are in partial
consideration for the sale and goodwill of the Company to Equivest Finance, a
Florida corporation ("Equivest").
NOW, THEREFORE, in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby covenant and agree
as follows:
1. Employment
The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to remain in the employ of the Company, on and subject
to the terms and conditions of this Agreement.
2. Term
The Period of the Executive's employment under this Agreement
(the "Employment Period") shall commence on the Effective Date and shall expire
on the fifth anniversary of the Effective Date. The Employment Period shall be
automatically extended for an additional year on the first anniversary of the
Effective Date and each succeeding anniversary of the Effective Date, unless
written notice of non-extension is provided by either party to the other party
at least 180 days prior to such anniversaries.
3. Positions, Duties and Responsibilities
(a) The Executive shall serve as, and with the title, office
and authority of, Chief Executive Officer of the Company and the Company shall
use all reasonable efforts to ensure that for the duration of the Employment
Period, the Executive is elected or appointed to the Board of Directors of the
Company (the "Board of the Company") and to the Board of Directors of Equivest
(the "Board of Equivest").
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(b) The Executive shall have effective general and active
day-to-day leadership and management of the business and affairs of the Company
and the subsidiaries of the Company, subject only to the authority of the Chief
Executive Office of Equivest (the "Equivest CEO") and the Board of the Company
and shall have all of the powers, authority, duties and responsibilities usually
incident to the position and office of Chief Executive Officer of the Company.
The Executive shall report directly to the individual who holds the position the
Equivest CEO. The Equivest CEO shall nominate, after consultation with the
Executive and the approval of the Board of Equivest, such other members of the
Board of the Company as the Equivest CEO shall determine from time to time.
(c) The Executive agrees to devote all of his business time,
efforts and skills to the performance of his duties and responsibilities under
this Agreement; provided, however, that nothing in this Agreement shall preclude
the Executive from devoting reasonable periods required for (i) participating in
professional, educational, philanthropic, public interest, charitable, social or
community activities, (ii) serving as a director or member of an advisory
committee of any corporation or other entity that the Executive is serving on as
of the Effective Date or serving, subject to the prior written approval of the
Equivest CEO, on the board of directors of any other corporation or entity that
is not in competition with the Company, or (iii) managing his personal
investments; provided further that any such activities set forth in clauses (i)
through (iii) above do not interfere with the Executive's performance of his
duties and responsibilities hereunder.
(d) The Executive shall perform his duties at the principal
offices of the Company located in Newport, Rhode Island, but from time to time
the Executive will be required to travel to other locations in the proper
conduct of his responsibilities under this Agreement; provided, however, such
travel will not exceed, in the aggregate, three months during any calendar year
during the Employment Period.
4. Compensation and Benefits
In consideration of the services rendered by the Executive
during the Employment Period, the Company shall pay or provide the Executive the
compensation and benefits set forth below.
(a) Salary. The Company shall pay the Executive a base salary
(the "Base Salary") equal to at least $300,000 per annum. On each anniversary of
the Effective Date during the Employment Period, the Base Salary shall be
increased by the percentage increase in the Consumers Price Index for All Urban
Consumers for the twelve calendar months prior to such anniversary. In addition,
the Board may review the Base Salary with a view towards consideration of merit
increases and, once established, the Base Salary shall not be decreased
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during the Employment Period. The Base Salary shall be paid in arrears in
substantially equal installments at monthly or more frequent intervals, in
accordance with the normal payroll practices of the Company.
(b) Target Annual Bonus. The Company shall provide the
Executive with the opportunity to earn an annual target bonus (the "Target
Annual Bonus") for each fiscal year of the Company ending during the Employment
Period, however, in no circumstances shall the Target Annual Bonus be paid where
performance does not equal the Pre-Tax Profit Target (as defined below). The
Target Annual Bonus will be payable to the Executive as follows: (i) in the
event that the pre-tax profits of the Company equals 100% of the Pre-Tax Profit
Target but less than 125% of the Pre-Tax Profit Target for a given fiscal year
of the Company ending during the Employment Period, the Target Annual Bonus for
such fiscal year will be equal to 40% of the latest Base Salary in effect at or
prior to the end of such fiscal year; and (ii) in lieu of the Target Annual
Bonus described in clause (i) of this sentence, in the event that the pre-tax
profits of the Company equals or exceeds 125% of the Pre-Tax Profit Target for a
fiscal year of the Company ending during the Employment Period, the Target
Annual Bonus for such fiscal year will be equal to 60% of the latest Base Salary
in effect at or prior to the end of such fiscal year. The Pre-Tax Profit Target
will be as follows: $5.1 million for the 1998 fiscal year; $7.1 million for the
1999 fiscal year; $9.6 million for the 2000 fiscal year; $12.5 million for the
2001 fiscal year; and $16.2 million for the 2002 fiscal year. Pre-tax profits
for a fiscal year means the Company's income before taxes as determined in
accordance with generally accepted accounting principles. The determination of
the actual amount of pre-tax profit shall be made for each fiscal year by the
Board of Equivest and, absent any manifest error, such determination shall be
final and binding on all interested persons. Payment of the Target Annual Bonus
will be made on a date which shall be as soon as practicable after all
determinations as to Company pre-tax profits are made for a fiscal year (the
"Bonus Determination Date"). Notwithstanding the foregoing, in the event that
there is a material change in the Company's operations for any fiscal year
during the Employment Period, including, without limitation, a material
acquisition or disposition, the Pre-Tax Profit Targets for such year and any
subsequent year during the Employment Period will be adjusted in a manner
mutually agreed to by the Executive and the Equivest CEO.
(c) Employee Benefits. The Executive shall be entitled to
participate in all employee benefit plans, programs, practices or arrangements
of the Company in which other senior executives of the Company are eligible to
participate from time to time, including, without limitations any qualified or
non-qualified pension, profit sharing and savings plans, any death benefit and
disability benefit plans, any medical, dental, health and welfare plans and any
stock purchase programs that are approved by the Board of the Company on terms
and conditions at least as favorable as provided to other senior executives of
the Company or Equivest. In addition, the Executive will be provided with six
weeks' paid vacation for each full fiscal year of the Company during the
Employment Period which shall be earned ratably over the course of the year but
which shall not be carried over from year to year during the Employment Period.
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(d) Fringe Benefits and Perquisites. The Executive shall be
entitled to an fringe benefits and perquisites that are generally made available
to senior executives of applicable committee thereof. In addition, the Company
shall pay the monthly automobile lease payment of the lease between the
Predecessor Company and Mercedes Benz as in effect on the Effective Date until
the expiration of such automobile lease.
5. Equity Incentives
(a) Annual Option Grant. As soon as practicable after the end
of each fiscal year ending during the Employment Period, as long as the
Executive is employed by the Company on that date, the Executive shall receive a
grant of stock options from Equivest covering shares of the common stock of
Equivest (the "Common Stock") based upon achievement of the Pre-Tax Profit
Targets for such fiscal year as follows: (i) if the Company reaches at least
100%, but less than 125%, of the Pre-Tax Profit Target for a fiscal year, the
Executive shall receive for such fiscal year an option covering 30,000 shares of
the Common Stock; and (ii) in lieu of the grant of options described in clause
(i) of this sentence, if the Company equals or exceeds 125% of the Pre-Tax
Profit Target for a fiscal year, the Executive shall receive for such fiscal
year an option covering 60,000 shares of the Common Stock. Options covering
shares of Common Stock shall vest and become exercisable at a rate of 20% per
year for a five-year period and options covering shares of Common Stock shall
expire ten years from their dates of grant. The exercise purchase price of an
option shall be the fair market value of a share of the Common Stock on the date
of grant of the option. All such options shall be subject to a stock option
agreement entered into between the parties hereto on terms consistent with the
foregoing; provided, however, that the options shall be effective as of the date
of grant in accordance with the terms and conditions contained herein,
irrespective of whether a stock option agreement has been executed by the
parties. Except as expressly provided in Section 7(a)(iv) of this Agreement, all
unvested options shall immediately expire upon the date of the Executive's
termination of employment. No options shall be granted to the Executive after
the date of his termination of employment.
(b) Additional Equity Incentives. The Executive shall be
considered, from time to time, for the grant of additional stock options or
other equity incentives, but no such grant shall be required.
6. Termination of Employment
The Employment Period will be terminated upon the happening
of any of the following events:
(a) Resignation other than for Good Reason. The Executive
may, on 90 days' written notice to the Company, voluntarily terminate his
employment hereunder for any reason at any time including any reason that does
not constitute Good Reason.
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(b) Termination for Cause. The Company may terminate the
Executive's employment hereunder for Cause. For purposes of this Agreement, the
Executive shall be considered to be terminated for "Cause" only upon (i) the
conviction of the Executive of an act or acts that constitutes a misdemeanor
involving moral turpitude, or a felony, whether or not appeal is taken, (ii) the
conviction of the Executive for a violation of al law involving the Company and
its business, or (iii) the willful fraud or material dishonesty of the Executive
in connection with his performance of duties to the Company; (iv) the willful,
material and continued failure by the Executive to perform his duties under this
Agreement; (v) a material breach by the Executive of the provisions his duties
under this Agreement the Executive of the provisions detailed in Section 10 of
this Agreement; (vi) any material breach by any provision of this Agreement; or
(vii) gross insubordination or malfeasance in connection with the duties
contemplated by Section 3 hereof. However, in no event shall the Executive's
employment be considered to have been terminated for "Cause" unless and until
the Executive receives a copy of a resolution adopted by the Board finding that,
in the good faith opinion of the Board of Equivest, the Executive is guilty of
acts or omissions constituting Cause, which resolution has been duly adopted by
an affirmative vote of a majority of the Board, excluding the Executive and any
individual alleged to have participated in the acts constituting "Cause." The
Executive shall have the opportunity to cure any such acts or omissions (other
than item (i) or (ii) above) within 15 days of the Executive's receipt of such
resolution.
(c) Resignation for Good Reason. The Executive may
voluntarily terminate his employment hereunder for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) a material and continuing diminution in the position,
title, authority, duties or responsibilities of the Executive as
contemplated by Section 3 hereof as a result of any action by the
Company or Equivest; provided, however that it is expressly understood
and agreed that the Board of Equivest and the Equivest CEO shall be
entitled to give direction to the Executive consistent with the
position, title, authority, duties and responsibilities of the
Executive, and to approve or disapprove actions of the Company,
without any such direction, approval or disapproval being deemed to be
Good Reason, and that no decision of the Board of Equivest or the
Equivest CEO relating to the strategic direction of the Company,
Company investments or the deployment of the Company resources shall
constitute Good Reason;
(ii) failure of the Executive to be a member of the Board of
Equivest other than in the event that the Executive voluntarily
resigns from the Board of Equivest; provided, however, that this
clause (ii) shall no longer be a basis for Good Reason resignation
after the date the Executive is no longer entitled to be a member of
the Board of Equivest under Article VI of the Shareholders' Agreement;
(iii) failure of the Executive to report principally and
directly to the individual who holds the position of Equivest CEO;
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(iv) the relocation of the Company's principal executive
offices to a location more than 40 miles from its current location in
Newport, Rhode Island or the location of the Executive's own office to
other than the Company's principal executive offices without the
Executive's prior written consent;
(v) any material breach by the Company or Equivest of
Agreement; or
(vi) any failure by the Company to obtain an assumption of
this Agreement by a successor corporation as required under Section
11(a) hereof.
However, in no event shall the Executive be considered to
have terminated his employment for "Good Reason" unless and until the Company
receives written notice from the Executive, within 45 days of the date the
Executive knows of the events constituting Good Reason, identifying in
reasonable detail the acts or omissions constituting "Good Reason" and the
provision of this Agreement relied upon, and such acts or omissions are not
cured by the Company to the reasonable satisfaction of the Executive within 30
days of the Company's receipt of such notice.
(d) Termination without Cause. The Company shall have the
right to terminate the Executive's employment hereunder other than for Cause at
any time, subject to the consequences of such termination as set forth in
Section 7 of this Agreement.
(e) Disability. The Executive's employment hereunder shall
terminate upon his Disability. For purposes of this Agreement, "Disability"
shall mean the inability of the Executive to perform his duties to the Company
on account of physical or mental illness or incapacity for a period of six
consecutive months as a result of a condition that is treated as a total and
permanent disability under the long-term disability insurance policy of the
Company that covers the Executive. The Executive's employment hereunder shall be
deemed terminated by reason of Disability fifteen days following the date of
written notice from the Board of Equivest indicating the intent of the Board of
Equivest to terminate the Executive for Disability unless the Executive return
to full-time employment prior to the expiration of such fifteen-day period.
7. Compensation Upon Termination of Employment
In the event the Executive's employment by the Company is
terminated during the Employment Period, the Executive shall be entitled to the
severance payments and benefits specified below:
(a) Resignation for Good Reason, Termination without Cause.
In the event the Executive voluntarily terminates his employment hereunder for
Good Reason or is terminated by the Company other than for Cause, death or
Disability, the Company shall pay the Executive and provide him with the
following:
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(i) Accrued Rights. The Company shall pay the Executive the
sum of (A) his earned but unpaid Base Salary through the date of
termination, (B) any earned but unpaid Target Annual Bonus for any
completed fiscal year that ended prior to the date of termination, (C)
any unreimbursed business expenses or other amounts due to the
Executive from the Company as of the date of termination (the "Accrued
Rights"). The Accrued Rights shall be made in a lump sum cash payment,
net of any required tax withholding, no later than the fifteenth
business day following the Executives date of termination (or the
expiration of any applicable cure period, if later). In additional,
the Company shall provide to the Executive all payments, rights and
benefits due as of the date of termination under the terms of the
Company's employee and fringe benefit plans and programs in which the
Executive participated during the Employment Period in accordance with
the terms of such plans and programs.
(ii) Pro-Rata Bonus. In the event that the Executive is
terminated pursuant to Section 6(c) or 6(d) of this Agreement after
June 30th of a fiscal year in which it is subsequently determined that
the applicable Pre-Tax Profit Target had been achieved, Executive will
receive, as soon as practicable after the Bonus Determination Date,
payment of a pro-rata Target Annual Bonus the amount of which shall be
equal to the Target Annual Bonus determined according to the
provisions of Section 4(b) of this Agreement (determined as if the
Executive's employment had not terminated) multiplied by a fraction,
the numerator of which shall be the number of days in the fiscal year
prior to the date of the Executive's termination of employment and the
denominator of which shall be 365.
(iii) Severance Payment. Subject to Section 10(c) of this
Agreement, the Company shall continue to pay the Executive his Base
Salary in regular payroll installment, at a rate in effect at the time
of termination of the Executive's employment, from such date of
termination of employment until the end of the Employment Period as
then in effect.
(iv) Equity. All stock options and other equity-based rights
held by the Executive at the date of termination shall become
immediately and fully vested and exercisable, and the Executive shall
retain the right to exercise all outstanding stock options for one
year from the date of such termination.
(v) Continued Benefits. The Company shall continue to provide
the Executive and his eligible dependents with the benefits detailed
in Section 4(d) of this Agreement, on the same terms and with the same
level of contributions by the Executive, that were provided to the
Executive immediately prior to termination of employment until the
earlier of (i) the expiration of the remaining Employment Period and
(ii) the Executive becoming eligible for coverage under comparable
plans of a subsequent employer.
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(b) Resignation without Good Reason; Termination for Cause.
In the event hereunder other than for Good Cause, the Company shall pay the
Executive and provide him with any earned but unpaid Base Salary through the
date of termination, any earned but unpaid Target Annual Bonus for any completed
fiscal year that ended prior to the date of termination and any unreimbursed
business expenses due to the Executive from the Company as of the date of
termination. Upon such termination, (i) the Executive shall not be entitled to
receive, and the Company shall have no obligation to provide, any severance
payments under this Agreement, (ii) the Executive and his dependents shall not
be entitled to receive, the Company shall have no obligation to provide to the
Executive or his dependents, any benefits detailed in Section 4(d) of this
Agreement except as required by COBRA or other applicable law or under the terms
of the applicable plans, and (iii) options covering shares of Common stock under
this Agreement, whether vested or otherwise shall terminate immediately and
shall be of no further force or effect.
Notwithstanding the foregoing, the Company shall have the
right to terminate the Executive's employment in the event that the pre-tax
profits of the Company falls below 75% of the Pre-Tax Profit Target for the 2000
fiscal year or 75% of the Pre-Tax Profit Target for the 2001 fiscal year (as
such targets are adjusted from time to time pursuant to Section 4(b) of this
Agreement in the event of a material change in the operations of the Company).
In such circumstances the Executive shall be entitled to such benefits,
discussed above, as would be provided to the Executive had he terminated his
employment other than for Good Reason or the Company had terminated his
employment for Cause.
(c) Disability; Death. In the event the Executive's
employment hereunder is terminated by reason of the Executive's Disability or
death, the Company shall pay and provide the Executive (or his legal
representative) with any earned but unpaid Base Salary through the date to
termination including all disability or life insurance benefits (as applicable),
any earned but unpaid Target Annual Bonus for any completed fiscal year that
ended prior to the date of termination and any unreimbursed business expenses
due to the Executive from the Company as of the date of the Executives
Disability or death. Any options vested as of the date of the Executive's
termination of employment by reason of Disability or death shall remain
exercisable for 90 days following such date of termination.
(d) Release. If prior to the expiration of the Employment
Period, the Executive's employment is terminated for any reason, the Executive
shall execute a release in substantially the form attached hereto in Exhibit A.
Any payments due and owing to the Executive under this Agreement shall be
expressly conditional on (i) the signing and delivery of such release by the
Executive to the Company and (ii) the expiration of the seven day revocation
condition period, as detailed in the release.
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8. No Mitigation or Offset
The Executive shall not be required to seek other employment
or to reduce any severance benefit payable to him under Section 7 hereof and no
such severance benefit shall be reduced on account of any compensation received
by the Executive from other employment. The Company's obligation to pay benefits
under this Agreement shall not be reduced by any amount owed by the Executive to
the Company.
9. Tax Withholding; Method of Payment
All compensation payable pursuant to this Agreement shall be
subject to reduction by all applicable withholding, social security and other
federal, state and local taxes and deductions.
10. Restrictive Covenants
(a) Covenant Not to Disclose Confidential Information. The
Executive acknowledges that during the course of his affiliation with the
Company he has or will have access to and knowledge of certain information and
data related to the Company and it affiliates which the Company considers
confidential and the release of such information or data to unauthorized persons
would be extremely detrimental to the Company or any of its affiliates. As a
consequence, the Executive hereby agrees and acknowledges that he owes a duty to
the Company and its affiliates not to disclose, and agrees that without the
prior written consent of the Company, at any time, either during or after his
employment with the Company, he will not communicate, publish or disclose, to
any person anywhere or use, any Confidential Information (as hereinafter
defined), except as may be necessary or appropriate to conduct his duties
hereunder, provided the Executive is acting in good faith and in the best
interest of the Company and its affiliates, or as may be required by law or
judicial process. The Executive will use his best efforts at all times to hold
in confidence and to safeguard any Confidential Information from falling into
the hands of any unauthorized person and, in particular, will not permit any
Confidential Information to be read, duplicated or copied. The Executive will
return to the Company all Confidential Information in the Executive's possession
or under the Executive's control whenever the Company shall so request, and in
any event will promptly return all such Confidential Information if the
Executive's relationship with the Company is terminated for any or no reason and
will not retain any copies thereof. For purposes hereof the term "Confidential
Information" shall mean any information or data used by or belonging or relating
to the Company or affiliates that is not known generally to the industry in
which the Company is or may be engaged and which the Company or any of its
affiliates maintains on a confidential basis, including, without limitation, any
and all trade secrets, proprietary data and information relating to the business
and products, price list, customer lists, processes, procedures or standards,
know-how, manuals, business strategies, records, drawings, specifications,
designed, financial information, whether or not reduced to writing, or
information or data of the Company or any of its affiliates.
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(b) Covenant Not to Compete. The Executive acknowledges that
he has established and will continue to establish favorable relations with the
customers, clients and accounts of the Company or any of its subsidiaries and
will have access to trade secrets of the Company or any of its subsidiaries.
Therefore, in consideration of such relations and in partial consideration for
the sale and goodwill of the Company to Equivest, and to further protect trade
secrets, directly or indirectly, of the Company or any of its subsidiaries, the
Executive, and his wife Karen Harris, will not, directly or indirectly, without
the express written consent of the Equivest CEO with the approval of the Board
of Equivest:
(i) own or have any interest in or act as an officer,
director, partner, principal, employee, agent, representative,
consultant or independent contractor of, or in any way assist in, any
business which is engaged, directly or indirectly, in the timeshare
resorts or resort development business or a timeshare resorts or
resort development division of a hotel, hospitality or other business
(a) within the eastern seaboard of the United States of America north
of the northern border of South Carolina inland to 300 miles and
seaward to 300 miles from the coastal boundaries of such eastern
seaboard during the Employment Period and for a period of seven years
following the Executive's termination or resignation of employment for
any reason, and, in addition, (b) everywhere else within the United
States of America during the Employment Period and for a period of one
year following the Executive's termination or resignation of
employment for any reason;
(ii) solicit clients, customers or accounts of the Company or
any of its subsidiaries during the Employment Period and for a period
of seven years following the Executive's termination or resignation of
employment for any reason; or
(iii) solicit or in any manner influence or encourage any
person who is or shall be in the employ or service of the Company or
any of its subsidiaries to leave such employ or service for any other
employment opportunity during the Employment Period and for a period
of seven years following the Executive's termination or resignation of
employment for any reason.
Any breach of the provisions of this Section 10(b) by Karen Harris, the wife of
the Executive, shall be treated for all purposes of this Agreement as a breach
by the Executive.
(c) Equitable Relief. Recognizing the irreparable damage will
result to the Company in the event of the breach or threatened breach of any of
the foregoing covenants and assurances by the Executive contained in paragraph
(a) or (b) hereof, and that the Company's remedies at law for any such breach or
threatened breach will be inadequate, the Company and its successors and
assigns, in addition to such other remedies which may be available to them,
shall be entitled to an injunction, including a mandatory injunction, to be
issued by any court of competent jurisdiction ordering compliance with this
Agreement or enjoining and restraining the Executive, and each and every person,
firm or Company acting in concert or participation with him, from the
continuation of such breach and, in addition thereto, he shall pay to the
Company
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all ascertainable damages, including costs and reasonable attorneys' fees by the
Company by reason of the breach or threatened breach of said covenants and
assurances. in the event of a breach of the said covenants and assurances,
options covering shares of Common Stock under this Agreement whether vested or
otherwise, shall terminate immediately and shall be of no further force or
effect and any rights to future severance payments, discussed in Section 7 of
this Agreement, shall be immediately forfeited. The obligations of the Executive
and the rights of the Company, its successors and assigns under Section 10 of
this Agreement shall survive the termination of this Agreement. The covenants
and obligations of the Executive set forth in Section 10 hereof are in addition
to and not in lieu of or exclusive of any other obligations and duties of the
Executive to the Company, whether express or implied in fact or in law. In the
event that there is a judicial determination that there has been no breach of
the covenants and assurances contained in paragraphs (a) and (b) hereof, any
severance payments or options forfeited pursuant to this Section 10(c) shall be
immediately reimbursed or reinstated to the Executive.
11. Successors
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its successors and assigns and any person, firm,
corporation or other entity which succeeds to all or substantially all of the
business, assets or property of the Company. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business, assets or property of
the Company, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place, As used in this Agreement, the "Company"
shall mean the Company as hereinbefore defined and any successor to its
business, assets or property as aforesaid which executes and delivers an
agreement provided for in this Section 11 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executives personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts are due and payable to him hereunder, all such amounts, unless otherwise
provided herein shall be paid to the Executive's designated beneficiary or, if
there be no such designated beneficiary, to the legal representatives of the
Executive's estate.
12. No Assignment
Except as to withholding of any tax under the laws of the
United States or any other country, state or locality, neither this Agreement
nor any right or interest hereunder nor any amount payable at any time hereunder
shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, attachment, or other legal process, or encumbrance of any kind by the
Executive or the beneficiaries of the Executive or by his legal representatives
without the
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Company's prior written consent, nor shall than be any right of set-off or
counterclaim in respect of any debts or liabilities of the Executive, his
beneficiaries or legal representatives, provided, however, that nothing in this
Section 12 shall preclude the Executive from designating a beneficiary to
receive any benefit payable on his death, or the legal representatives of the
Executive from assigning any rights hereunder to the person or persons entitled
thereto under his will or, in case of intestacy, to the person or persons
entitled thereto under the laws of intestacy applicable to his estate.
13. Entire Agreement
This Agreement contains the entire understanding of the
parties with respect to the subject matter hereof and, except as specifically
provided herein, cancels and supersedes any and all other agreements between the
parties with respect to the subject matter hereof. Any amendment or modification
of this Agreement shall not be binding unless it is approved in writing by the
Equivest CEO and is in writing and signed by the Company and the Executive.
14. Severability
If a final judicial determination is made that any provision
of this Agreement is an unenforceable restriction against the Executive, the
provision hereof shall be rendered void on the extent that such judicial
determination finds such provisions unenforceable, and such unenforceable
provisions shall automatically be reconstructed and become a part of this
Agreement, effective as of the date first written above, to the maximum extent
in favor of the Company that is lawfully enforceable and such provision shall
then be enforceable and shall be enforced. A judicial determination that any
provision of this Agreement is unenforceable shall in no instance render the
entire Agreement unenforceable, but rather the Agreement will continue in full
force and effect absent any unenforceable provision to the maximum extent
permitted by law.
15. Notices
All notices which may be necessary or proper for either the
Company or the Executive to give to the other shall be in writing and shall be
delivered by hand or sent by registered or certified mail, return receipt
requested, or by air courier, to the following addresses:
if to the Executive: R. Perry Harris
Eastern Resorts Company
115 Long Wharf
P.O. Box 2000
Newport, Rhode Island 02840
Facsimile No.: (401) 846-3888
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with a copy to: Stephen R. Goldstein, Esq.
Goldstein, Kaitz & Fellman, LLP
800 South Street, Suite 380
Waltham, MA 02453
Facsimile No.: (781) 894-2129
if to the Company:Chief Executive Officer
Equivest Finance, Inc.
Two Clinton Square
Syracuse, New York 13202
Facsimile No.: (315) 422-9477
with a copy to: Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Linda C. Quinn, Esq.
Facsimile No.: (212) 848-7179/80/81/82
Notices shall be deemed given when sent, provided that any notice required under
Section 6 hereof or notice given pursuant to Section 2 hereof shall be deemed
given only when received. Any party may by like notice to the other party change
the address at which he or they are to receive notices hereunder.
16. Governing Law
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New York applicable
to contracts entered into and performed in such state.
17. Guarantee
By execution of this Agreement, Equivest hereby agrees to
guarantee the performance by the Company of all of its obligations under this
Agreement. The Executive may not seek payment from Equivest under this Section
17 unless (i) the Company fails to pay the Executive an amount which the
Executive is owed under this Agreement by the date on which it is due; (ii) the
Executive makes a written demand for a payment under this Agreement to the
Company following the due date of such payment; and (iii) the amount of such
payment is not paid to the Executive within 45 days of the date such written
demand is delivered to the Company.
13
<PAGE>
18. Legal Fees
In the event of any controversy or claim arising out of, or
relating to this Agreement, or the breach thereof, the losing party shall bear
the cost of all reasonable attorney fees and expenses of both parties.
14
<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first above written.
EXECUTIVE
___________________________
R. PERRY HARRIS
ERC ACQUISITION CORP.
_______________________________
By:
Title:
EQUIVEST FINANCE, INC. (solely in it's capacity
for purposes of granting options covering
shares of Common Stork of Equivest Finance,
Inc. and in it's capacity outlined in Section
17 of this Agreement)
_______________________________
By:
Title:
15
<PAGE>
EXHIBIT A
RELEASE
In exchange for the payments and other benefits described in
the attached Employment Agreement dated _________, 1998 (the "Agreement"), and
on the expiration of the seven day revocation period, during which I may, at any
time, revoke this release, I hereby release Eastern Resorts Corporation (the
"Company"), Equivest Finance, Inc. and any of their respective divisions,
affiliates, subsidiaries, parents, predecessors, successors, assigns, officers,
directors, trustees, employees, agents, stockholders, administrators,
representatives, attorneys, insurers and fiduciaries, past, present and future,
and Richard C. Breeden or any subsequent Chief Executive Officer of Equivest
Finance, Inc. (collectively, the "Released Parties"), from any and all claims of
any kind which I now have or may have against the Released Parties, whether
known or unknown to me, by reason of facts which have occurred on or prior to
the date that I have signed this Release (except a claim for the payments,
options and benefits described in the Agreement or any claims for
indemnification under the By-Laws of the Company as a result of my services as
an officer and director of the Company). Such released claims include, without
limitation, any and all claims and federal, state or local laws pertaining to
employment, including the Age Discrimination in Employment Act, Title VII of the
Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000c et seq., the Fair
Labor Standards Act, as amended, 29 U.S.C. Section 201 et seq., the Americans
with Disabilities Act, as amended, 42 U.S.C. Section 1201 et seq., the
Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et seq.,
the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et seq., the
Family and Medical Leave Act of 1992, 29 U.S.C. Section 2601 et seq., the New
York State Human Rights Law, N.Y. Exec. Law, Section 296 et seq., and any and
all state or local laws regarding employment discrimination and/or federal,
state or local laws of any type or description regarding employment, including,
but not limited to, any claims arising from or derivative of my employment with
the Company, as well as any and all claims under state contract or tort law.
I have read this release carefully, acknowledge that I have
been given at least 21 days to consider all of its terms, and have been advised
to consult with an attorney and any other advisors of my choice prior to
executing this Release, and I fully understand that by signing below I am
voluntarily giving up any right which I may have to sue or bring any other
claims against the Released Parties, including any rights and claims under the
Age Discrimination in Employment Act. I also understand that I have a period of
7 days after signing this Release within which to revoke my agreement, and that
neither the Company nor any other person is obligated to make any payments or
provide any other benefits to me pursuant to the attached Agreement until 8 days
have passed since my signing of this Release without my signature having been
revoked. Finally, I have not been forced or pressured in any manner whatsoever
to sign this Release, and I agree to all of its terms voluntarily.
This Release, and the attached Agreement, are final and
binding and may not be changed or modified except in a writing signed by both
parties.
[date] [signature]
16
<PAGE>
LOAN AND SECURITY AGREEMENT
$11,500,000 Credit Facility
provided by CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
to
EASTERN RESORTS COMPANY, LLC
As of August 25, 1998
<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITION OF TERMS...............................................1
1.1 Advance.....................................................1
1.2 Affiliate...................................................1
1.3 Agreement...................................................1
1.4 Applicable Laws.............................................2
1.5 Architect...................................................2
1.6 Association.................................................2
1.7 Base Rate...................................................2
1.8 Borrower....................................................2
1.9 Borrowing Base..............................................2
1.10 Bridge Loan Credit Facility.................................2
1.11 Business Day................................................2
1.12 Closing Date................................................2
1.13 Code........................................................2
1.14 Collateral..................................................3
1.15 Commitment..................................................5
1.16 Common Areas................................................5
1.17 Common Furnishings..........................................5
1.18 Common Association..........................................5
1.19 Condominium Declaration.....................................5
1.20 Consumer Loan...............................................5
1.21 Custodial Agreement.........................................5
1.22 Custodian...................................................5
1.23 Cut-Off Date................................................5
1.24 Debtor Relief Laws..........................................5
1.25 Declaration.................................................6
1.26 Default.....................................................6
1.27 Default Rate................................................6
1.28 Eligible Note Receivable....................................6
1.29 Encumbered Interval.........................................9
1.30 Encumbered Personal Property................................9
1.31 Environmental Laws.........................................10
1.32 Event of Default...........................................10
1.33 Exchange Company...........................................10
1.34 Financial Statements.......................................10
1.35 GAAP.......................................................11
1.36 Guarantors.................................................11
1.37 Guaranty...................................................11
1.38 Hazardous Materials........................................11
1.39 Hazardous Materials Indemnity Agreement....................11
1.40 Improvements...............................................11
<PAGE>
ii
1.41 Interest Rate..............................................11
1.42 Interval...................................................11
1.43 Land.......................................................11
1.44 Lien.......................................................12
1.45 Loan.......................................................12
1.46 Loan Documents.............................................12
1.47 Lockbox Agent..............................................13
1.48 Lockbox Agreement..........................................13
1.49 Mandatory Prepayment.......................................13
1.50 Maturity Date..............................................13
1.51 Minimum Monthly Interest Payment...........................13
1.52 Minimum Net Worth Requirement..............................13
1.53 Minimum Quarterly Net Income Requirement...................13
1.54 Mortgage Component.........................................14
1.55 Mortgage Component Advance.................................14
1.56 Mortgage Note..............................................14
1.57 Mortgage Payment Guaranty..................................14
1.58 Mortgaged Real Property....................................14
1.59 Note Receivable............................................14
1.60 Obligations................................................14
1.61 Payment Authorization Agreement............................15
1.62 Permitted Liens and Encumbrances...........................15
1.63 Person.....................................................15
1.64 Phase I Environmental Inspection...........................15
1.65 Plans......................................................15
1.66 Pledged Note Receivable....................................16
1.67 Purchase Agreement.........................................16
1.68 Purchase Price.............................................16
1.69 Purchaser..................................................16
1.70 Receivables Component......................................16
1.71 Receivables Component Advance..............................16
1.72 Receivables Note...........................................16
1.73 Receivables Payment Guaranty...............................16
1.74 Resort.....................................................16
1.75 RFI........................................................16
1.76 Resort Condominium Regime..................................17
1.77 Resort Mortgage............................................17
1.78 Servicing Agent............................................17
1.79 Servicing Agreement........................................17
1.80 Survey.....................................................17
1.81 Tangible Net Worth.........................................17
1.82 Timeshare Association......................................17
<PAGE>
iii
1.83 Timeshare Construction Credit Facility.....................17
1.84 Timeshare Declaration......................................17
1.85 Timeshare Documents........................................18
1.86 Timeshare Receivables Hypothecation Facility...............18
1.87 Timeshare Receivables Purchase Facility....................18
1.88 Title Insurance Company....................................18
1.89 Title Policy...............................................18
1.90 Unit.......................................................18
1.91 Unit Release Fee...........................................18
SECTION 2. THE LOAN.........................................................19
2.1 Purposes...................................................19
2.2 Advances...................................................19
2.3 Interest Rate..............................................20
2.4 Payments...................................................20
2.5 Prepayments................................................22
2.6 Guaranty...................................................23
SECTION 3. COLLATERAL.......................................................23
3.1 Grant of Security Interest.................................23
3.2 Security Interest in All Pledged Notes Receivable..........23
3.3 Financing Statements.......................................23
3.4 Location of Collateral.....................................24
3.5 Protection of Collateral; Reimbursement....................24
3.6 Cross-Collateralization and Default........................25
SECTION 4. CONDITIONS PRECEDENT TO CLOSING AND FUNDING
PROCEDURES..........................................................25
4.1 Conditions Precedent.......................................25
4.2 Funding Procedures.........................................32
SECTION 5. GENERAL REPRESENTATIONS AND WARRANTIES.....................36
5.1 Organization, Standing, Qualification......................36
5.2 Organization, Standing, Qualification......................36
5.3 Authorization, Enforceability, Etc.........................37
5.4 Financial Statements and Business Condition................38
5.5 Taxes......................................................39
5.6 Title to Collateral and Other Properties; Prior Liens......39
5.7 Subsidiaries, Affiliates, and Capital Structure............39
5.8 Litigation, Proceedings, Etc...............................39
5.9 Licenses, Permits, Etc.....................................40
5.10 Environmental Matters......................................40
<PAGE>
iv
5.11 Full Disclosure............................................40
5.12 Use of Proceeds/Margin Stock...............................41
5.13 No Defaults................................................41
5.14 Restrictions on Borrower and Guarantors....................41
5.15 Broker's Fee...............................................41
5.16 Tax Identification/Social Security Numbers.................41
5.17 Legal Compliance...........................................42
5.18 Deferred Compensation Plans................................42
5.19 Labor Relations............................................43
5.20 Resort.....................................................43
5.21 Timeshare Documents and Reports............................44
5.22 Operating Contracts........................................44
5.23 Reliance by Lender.........................................44
SECTION 6. COVENANTS..................................................45
6.1 Affirmative Covenants......................................45
6.2 Negative Covenants.........................................56
6.3 Minimum Net Worth Requirement; Minimum Quarterly Net
Income Requirement.........................................61
SECTION 7. EVENTS OF DEFAULT..........................................61
7.1 Payment Default............................................61
7.2 Covenant Defaults..........................................61
7.3 Warranties or Representations..............................61
7.4 Enforceabilty..............................................62
7.5 Insolvency.................................................62
7.6 Involuntary Proceedings....................................62
7.7 Voluntary Proceedings......................................62
7.8 Attachment; Judgment; Tax Liens............................62
7.9 Going Concern Reference....................................62
7.10 Failure to Deposit Proceeds................................62
7.11 Removal of Collateral......................................63
7.12 Other Defaults.............................................63
7.13 Material Adverse Change....................................63
7.14 Minimum Net Worth Requirement..............................63
7.15 Minimum Quarterly Net Income Requirement...................63
7.16 Default by Borrower in Other Agreements....................63
7.17 Violation of Negative Covenants............................63
7.18 Attachment; Judgment; Tax Liens............................63
7.19 Declarations...............................................63
7.20 Transfer of Property.......................................63
7.21 Lien Against Resort........................................64
<PAGE>
v
7.22 Title......................................................64
7.23 Loss of License............................................64
7.24 Suspension of Sales........................................64
7.25 Failure to Convey..........................................64
7.26 Failure to Annex...........................................64
SECTION 8. REMEDIES...................................................65
8.1 Remedies Upon Default......................................65
8.2 Notice of Sale.............................................69
8.3 Application of Collateral; Termination of Agreements.......70
8.4 Rights of Lender Regarding Collateral......................70
8.5 Delegation of Duties and Rights............................71
8.6 Lender Not in Control......................................71
8.7 Waivers....................................................71
8.8 Cumulative Rights..........................................72
8.9 Expenditures by Lender.....................................72
8.10 Diminution In Value of Collateral..........................72
SECTION 9. CERTAIN RIGHTS OF LENDER.........................................72
9.1 Protection of Collateral...................................72
9.2 Performance by Lender......................................72
9.3 No Liability of Lender.....................................73
9.4 Right to Defend Action Affecting Security..................74
9.5 Expenses...................................................74
9.6 Lender's Right of Set-Off..................................74
9.7 Right of Lender to Extend Time of Payment, Substitute,
Release Security, Etc....................................74
9.8 Assignment of Lender's Interest............................74
9.9 Notice to Purchaser........................................74
9.10 Collection of the Notes....................................75
9.11 Power of Attorney..........................................75
9.12 Relief from Automatic Stay, Etc............................76
9.13 Investigations and Inquiries...............................76
9.14 Verification of Use........................................76
SECTION 10. TERM OF AGREEMENT...............................................77
SECTION 11. MISCELLANEOUS...................................................77
11.1 Notices....................................................77
11.2 Survival...................................................78
11.3 Governing Law..............................................78
11.4 Limitation on Interest.....................................78
11.5 Invalid Provisions.........................................79
<PAGE>
vi
11.6 Successors and Assigns.....................................79
11.7 Amendment..................................................81
11.8 Counterparts; Effectiveness...............................81
11.9 Lender Not a Fiduciary.....................................81
11.10 Release and Return of Notes Receivable.....................81
11.11 Accounting Principles......................................81
11.12 Entire Agreement...........................................81
11.13 Litigation.................................................82
11.14 Incorporation of Exhibits and Schedules....................82
11.15 Consent to Advertising and Publicity.......................82
11.16 Directly or Indirectly.....................................83
11.17 Captions...................................................83
11.18 Gender.....................................................83
11.19 No Duty....................................................83
11.20 Submissions................................................83
11.21 Confidentiality............................................84
11.22 Borrower's Acknowledgment..................................84
<PAGE>
vii
LIST OF EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
EXHIBIT "A" - Form of Custodial Agreement
EXHIBIT "B" - Form of Pledge and Assignment of Notes
Receivable and Purchase Agreements
EXHIBIT "C" - Form of Lockbox Agreement
EXHIBIT "D" - Permitted Liens and Encumbrances
EXHIBIT "E" - Form of Servicing Agreement
EXHIBIT "F" - List of Units for Which No Unit Release Fee is
Due Lender
EXHIBIT "G" - Form of Receivables Advance Request
EXHIBIT "H" - Description of Pending Litigation
EXHIBIT "I" - Forms of Borrowing Base Report and Other
Section 6.1(g) Reports
</TABLE>
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made and
entered into as of August 25, 1998, by and among EASTERN RESORTS COMPANY, LLC, a
Rhode Island limited liability company ("Borrower"), EQUIVEST FINANCE, INC., a
Florida corporation ("Equivest"), EASTERN RESORTS CORPORATION, a Delaware
corporation ("ERC"), (Equivest and ERC are hereinafter collectively referred to
as "Guarantors"), and CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a
Delaware limited liability company ("Lender").
In consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITION OF TERMS
The capitalized terms used in this Agreement are defined in this
Section 1. The definitions include the singular and plural forms of the terms
defined.
1.1 Advance. The Mortgage Component Advance and/or the
Receivables Component Advance.
1.2 Affiliate.
(a) Any shareholder, officer, director, general partner, or
member of a Person; and
(b) Any Person that, directly or indirectly, through one (1)
or more intermediaries, controls, is controlled by, or is under common control
with the Person in question or for which any other Affiliate of such Person is
an officer, director, shareholder, general partner, or member. For purposes of
the definition of "Affiliate": (i) a Person that, either alone or pursuant to an
arrangement or understanding with one (1) or more other Persons, (A) owns,
controls, or has the power to vote (including by proxy) greater than fifty
percent (50%) of any class of voting securities of a corporation or that
determines in any manner the election or appointment of a majority of the
directors thereof; or (B) has the power or practical ability to exercise a
controlling influence over the management or policies of such corporation, shall
be presumed to be in control of said corporation; and (ii) a Person shall be
deemed to be in control of a Person other than a corporation if he or it, either
alone or pursuant to an arrangement or understanding with one (1) or more other
Persons, (A) owns, controls, or has the power to vote (including by proxy)
greater than fifty percent (50%) of the equity or beneficial interest of such
Person; or (B) has the power or practical ability to exercise a controlling
influence over the management or policies of such Person.
1.3 Agreement. This Loan and Security Agreement by and among Borrower,
Guarantors, and Lender (including the exhibits and schedules hereto), as it may
be amended and/or restated from time to time.
<PAGE>
2
1.4. Applicable Laws. Any and all federal, state, and local statutes,
ordinances, rules, regulations, court orders and decrees, administrative orders
and decrees, and other legal requirements of any and every conceivable type to
which Borrower, any Guarantor, the Resort or any portion thereof, or all or any
portion of the Collateral is or becomes subject from time to time, including but
not limited to those governing the marketing and sale of Intervals at or with
respect to the Resort, as the same have been or may in the future be amended
from time to time.
1.5 Architect. An architect who is duly licensed in the State of Rhode
Island who is acceptable to Lender, in its sole discretion.
1.6 Association. The Condominium Association and/or the Timeshare
Association.
1.7 Base Rate. On any given date, a fluctuating rate of interest equal
to the interest rate per annum offered for three (3) month deposits in U.S.
dollars in the London interbank market that appears on Telerate Page 3750 or
such other page as may replace Page 3750 on that service or such other service
or services as may be nominated by the British Bankers Association for the
purpose of displaying such rate (collectively, "Telerate Page 3750") as of 9:00
a.m. New York time on the date in question (the "Libor Rate"); provided,
however, that in the event that (i) more than one (1) such Libor Rate is
published, then the average of such rates shall apply; or (ii) no such Libor
Rate is published, then the Libor Rate shall be determined from such comparable
financial reporting company as Lender, in its sole discretion, shall select.
1.8 Borrower. Eastern Resorts Company, LLC, together with its
successors and assigns.
1.9 Borrowing Base. Ninety percent (90%) of the aggregate outstanding
principal balance of all Eligible Notes Receivable pledged to Lender as partial
security for the Receivables Component of the Loan as of the date in question.
1.10 Bridge Loan Credit Facility. The $15,000,000 bridge loan as
evidenced in part by that certain Loan and Security Agreement of even date
herewith by and among Lender, Equivest, ERC, Borrower, and RFI, the proceeds of
which will be used to finance the acquisition by Equivest of 100% of the capital
stock of ERC.
1.11 Business Day. Each day that is not a Saturday, Sunday, or a legal
holiday under the laws of the State of New York or the United States.
1.12 Closing Date. The date of this Agreement.
1.13 Code. The version of the Uniform Commercial Code in effect from
time to time in the State of Rhode Island, the State of New York, and/or any
other applicable jurisdiction, as amended from time to time.
<PAGE>
3
1.14 Collateral.
(a) All right, title, and interest of Borrower in and to the
Mortgaged Real Property as described in the Resort Mortgage;
(b) Absolute and unconditional first priority Liens and
security interests in and to all now owned or hereafter acquired right, title,
and interest of Borrower in and to the Encumbered Intervals, together with all
appurtenant rights and interests, including but not limited to appurtenant
rights and interests in and to the Common Areas and Common Furnishings and all
easement, license, and use rights in and to all facilities and amenities
available for the use and enjoyment of Purchasers as described in the Timeshare
Documents;
(c) Absolute and unconditional first priority Liens and
security interests in and to any and all now owned or hereafter acquired right,
title, and interest of Borrower in and to the Encumbered Personal Property,
together with the cash and non-cash proceeds thereof;
(d) Absolute and unconditional first priority collateral
assignments in and pledges of all now owned or hereafter acquired right, title,
and interest of Borrower in and to all Pledged Notes Receivable, together with
all accounts, chattel paper, and general intangibles related thereto and the
cash and non-cash proceeds thereof;
(e) An absolute and unconditional first priority collateral
assignment of any and all leases, subleases, licenses, concessions, entry fees,
and other agreements that grant a possessory interest in and to, or the right to
use, any Mortgaged Real Property, Encumbered Intervals, Encumbered Personal
Property, or any portion thereof (collectively, the "Resort Leases");
(f) An absolute and unconditional first priority collateral
assignment of all of the rents, revenues, income, proceeds, royalties, profits,
and other amounts payable for using, leasing, licensing, possessing, operating
from or in, or otherwise enjoying all or any portion of any Mortgaged Real
Property, Encumbered Personal Property, or Encumbered Intervals, including,
without limitation, that generated from hotel, restaurant, bar, or spa
operations, damages received upon the occurrence of a default under any of the
Resort Leases, and all proceeds payable under any policy of insurance covering
loss of rents with respect thereto (collectively, the "Resort Income");
(g) An absolute and unconditional first priority collateral
assignment of all other agreements to which Borrower or any Affiliate thereof is
or becomes a party or holds any interest and which in any way relate to the
design, construction, renovation, use, occupancy, maintenance, operation, or
enjoyment of any Mortgaged Real Property, Encumbered Personal Property, or
Encumbered Intervals, including but not limited to construction contracts,
subcontractors' agreements, architects' contracts, utility contracts,
maintenance agreements, management agreements, service contracts, employment
agreements, payment and performance bonds, and any agreement guaranteeing the
performance of the obligations contained in any of the foregoing agreements;
<PAGE>
4
(h) An absolute and unconditional first priority collateral
assignment of Borrower's entire right, title, and interest in and to all Plans,
all agreements for the furnishing of architectural, engineering, and/or design
services, and all construction contracts and other agreements for the furnishing
of labor and/or materials in connection with the development and construction of
all or any portion of the Resort;
(i) An absolute and unconditional first priority collateral
assignment of all now owned or hereafter acquired right, title, and interest of
Borrower in and to any and all easements, contracts, leasehold interests
(whether as lessor or lessee), permits, licenses, franchises, and approvals in
respect of all or any portion of the Resort;
(j) First priority Liens and security interests in and to all
inventory, supplies, accounts, chattel paper, and general intangibles now owned
or hereafter acquired by Borrower or any Affiliate thereof, used or useful in
connection with, and placed or to be placed on or under any of the Mortgaged
Real Property, including but not limited to the Units contained therein, and the
Encumbered Intervals, together with the cash and non-cash proceeds thereof;
(k) First priority Liens and security interests in and to all
documents, instruments, accounts, chattel paper, and general intangibles
relating to the Pledged Notes Receivable and the other Collateral, including the
cash and non-cash proceeds thereof;
(l) First priority Liens and security interests in and to all
books, records, reports, computer tapes, computer disks, and software relating
to all or any portion of the other Collateral;
(m) Absolute and unconditional first priority collateral
assignments of all rights, powers, privileges, benefits, and interests granted
or conferred upon Borrower, as "developer" or "declarant," pursuant to the
Condominium Declaration, the Timeshare Declaration, and the Condominium
Association's and Timeshare Association's respective bylaws;
(n) Extensions, additions, improvements, betterments,
renewals, substitutions, and replacements of, for, or to any of the other
Collateral, wherever located, together with the products, proceeds, issues,
rents, and profits thereof and any replacements, additions, or accessions
thereto or substitutions thereof, and all rights in or under insurance policies
and to the proceeds of any insurance policies covering any of the other
Collateral, all rights to unearned or refunded insurance premiums, and the
proceeds of any condemnation awards or any claims regarding any of the other
Collateral; and
(o) All now owned or hereafter acquired right, title, and
interest of Borrower in and to any and all collateral for the Timeshare
Receivables Purchase Facility, the Timeshare Construction Credit Facility, the
Timeshare Receivables Hypothecation Facility, the Bridge Loan Credit Facility,
and any other timeshare-related loan or credit facility between Lender and
Borrower or any Affiliate of Borrower.
<PAGE>
5
1.15 Commitment. That certain commitment letter dated July 17, 1998,
and subsequently accepted on behalf of Borrower, pursuant to which Lender agreed
to make the Loan.
1.16 Common Areas. The "Common Areas" (as such term is defined in the
Timeshare Declaration), Common Elements (as such term is defined in the
Condominium Declaration), and other facilities of the Resort, as defined or
provided for in the Declarations or any other Timeshare Documents, including,
without limitation, the Land and all improvements thereto except for the Units
that have been dedicated to the condominium or comparable form of ownership, as
well as any Limited Common Areas and Limited Common Elements, as those terms are
defined and used in the Declarations.
1.17 Common Furnishings. All furniture, furnishings, fixtures,
appliances, carpeting, and equipment located in a Unit or elsewhere within the
Resort, as defined or provided for in the Declarations or any other Timeshare
Documents.
1.18 Common Association. Long Wharf Resort Condominium Association, a
Rhode Island unincorporated association.
1.19 Condominium Declaration. That certain Declaration of Condominium
of the Long Wharf Condominium, dated December 30, 1996, and recorded on December
30, 1996, in the Newport Land Evidence Records in Book 749, at Page 317,
together with any amendments, supplements, or restatements thereof.
1.20 Consumer Loan. Any purchase money loan that is evidenced by a
Pledged Note Receivable, the proceeds of which are applied by the maker of such
Pledged Note Receivable toward the Purchase Price of an Interval.
1.21 Custodial Agreement. That certain Custodial Agreement by and among
Borrower, Lender, and Custodian in substantially the form of Exhibit "A,"
attached hereto and incorporated herein by this reference, pursuant to which
Custodian will maintain custody of all original Pledged Notes Receivable and
Purchase Agreements and certain original and duplicate documents and instruments
related thereto and take certain actions in connection therewith.
1.22 Custodian. U.S. Bank National Association or such other Person as
Lender, in its sole discretion, engages from time to time, at Borrower's sole
cost and expense, to maintain custody of all original Pledged Notes Receivable
and certain original and duplicate documents and instruments related thereto and
take certain actions in connection therewith.
1.23 Cut-Off Date. The date that is five (5) Business Days prior to the
Closing Date.
1.24 Debtor Relief Laws. Any applicable liquidation, conservatorship,
receivership, bankruptcy, moratorium, rearrangement, insolvency, reorganization,
or similar law, proceeding, or
<PAGE>
6
device providing for the relief of debtors from time to time in effect and
generally affecting the rights of creditors.
1.25 Declaration. The Condominium Declaration and/or the Timeshare
Declaration.
1.26 Default. An event or condition, the occurrence of which
immediately is or, with the lapse of time or the giving or notice or both, would
become, an Event of Default hereunder.
1.27 Default Rate. The Interest Rate plus four percent (4%) per annum;
provided, however, that the Default Rate shall in no event exceed the highest
interest rate permitted to be charged under any applicable usury laws.
1.28 Eligible Note Receivable. A Pledged Note Receivable that satisfies
each of the following conditions:
(a) Borrower is the sole payee of the Note Receivable;
(b) lt arises from a bona fide sale by Borrower of one (l) or
more Intervals to a Purchaser whose creditworthiness is acceptable to Lender, in
its sole discretion;
(c) The Interval sale from which it arises has not been
canceled by the Purchaser or Borrower, any statutory or other applicable
cancellation or rescission period has expired, the Interval purchased by the
Purchaser has not been surrendered in accordance with any applicable terms of
the relevant Purchase Agreement, and the related Interval sale complies fully
with the terms, provisions, and conditions of this Agreement, the other Loan
Documents, the Timeshare Documents, and all Applicable Laws;
(d) It evidences the obligation of the applicable Purchaser to
pay the balance due on the Purchase Price of the Interval being acquired by such
Purchaser, all as described and set forth in the Purchase Agreement to which
such Pledged Note Receivable pertains, which Purchase Agreement has been
collaterally assigned by Borrower to Lender;
(e) Principal and interest payments on it are payable to
Borrower in legal tender of the United States and are made by the applicable
Purchaser and not by Borrower or Affiliate thereof, and the first such payment
thereon is due Borrower no more than forty-five (45) days following the Closing
Date;
(f) Scheduled payments of principal and interest on it are due
in equal monthly installments and result in the complete amortization of the
original principal amount thereof within the original term thereof;
(g) It has an original term of no greater than one hundred
twenty (120) months;
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7
(h) It has a minimum annual interest rate of 14%; provided,
however, that up to five percent (5%) of all Eligible Notes Receivable (on the
basis of the aggregate outstanding principal balance thereof) may provide for
the payment of zero interest, as long as the applicable Purchaser has paid at
least fifty percent (50%) of the Purchase Price of the relevant Interval and the
term of such Pledged Note Receivable does not exceed twelve (12) months;
(i) A cash down payment and/or other cash payments have been
received by Borrower from the Purchaser or the maker of the Pledged Note
Receivable in an amount equal to at least ten percent (1 0%) of the actual
purchase price of the relevant Interval, no portion of such down payment has
been paid or loaned to the Purchaser by Borrower, and the Purchaser has received
no cash or other rebates of any kind;
(j) No monthly installment due with respect to the Pledged
Note Receivable is more than sixty (60) days' contractually past due as of the
Cut-Off Date or any time thereafter;
(k) The Purchaser of the relevant Interval has access to a
Unit within the Resort during any use period reserved by or assigned to such
Purchaser, all in accordance with the Declarations and the other Timeshare
Documents;
(l) Neither the Purchaser of the relevant Interval nor any
other maker of the Pledged Note Receivable is an Affiliate of, related to, or
employed by Borrower or Affiliate thereof;
(m) The Purchaser or other obligor has no bona fide claim
against Borrower or Affiliate thereof or any defense, set-off, or counterclaim
with respect to the Pledged Note Receivable;
(n) The Purchaser or other obligor has purchased at least one
(1) but not more than six (6) Intervals in the Resort;
(o) The Pledged Note Receivable is made by a U.S. resident;
provided, however, that at any given time, up to ten percent (10%) of the
aggregate outstanding principal balance of all Eligible Notes Receivable may be
comprised of Pledged Notes Receivable made by Purchasers who are not U.S.
residents;
(p) The original of the Pledged Note Receivable and all
related documents and instruments have been endorsed by Borrower to the order of
Lender in the manner prescribed by Lender and delivered to Lender or Custodian
as provided herein, such endorsement in favor of Lender is legally enforceable
in accordance with all Applicable Laws, and the terms, provisions, and
conditions thereof and all such related documents and instruments otherwise
comply in all respects with all Applicable Laws;
(q) The Unit in the Resort set forth in the applicable
Purchaser's Purchase Agreement has been fully completed and furnished in
accordance with the terms and provisions of
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8
such Purchase Agreement and the other Timeshare Documents, a certificate of
occupancy (or its legal equivalent) for such Unit has been issued, such Unit is
not subject to any Lien (other than the Permitted Liens and Encumbrances) to
which Lender has not previously consented in writing, and such Unit has properly
been annexed into the Resort Condominium Regime, pursuant to the Condominium
Declaration, and the Interval Ownership Plan, as such term is defined in the
Timeshare Declaration;
(r) All of the Resort's facilities and amenities as described
in the applicable Purchaser's Purchase Agreement and the other Timeshare
Documents have been fully completed and are available for the use and enjoyment
of such Purchaser and the other Purchasers of Intervals in Units at the Resort;
(s) The forms of promissory note, mortgage (if any), federal
truth-in-lending disclosure statement, Purchase Agreement, owner's
acknowledgment, certificate of title, and other documents and instruments
relating to the Interval purchase transaction giving rise to such Pledged Note
Receivable have been approved in advance by Lender in writing, and Lender has
received an opinion from Borrower's counsel, in form and substance acceptable to
Lender, in its sole discretion, confirming that (i) the specific forms thereof,
when properly executed by a competent individual or validly existing legal
entity, for adequate consideration, are sufficient to create valid and legally
binding obligations of the applicable makers, Purchasers, and other obligors,
enforceable against each of them in accordance with the terms thereof (except as
such enforcement may be subject to any applicable bankruptcy, insolvency, or
similar laws generally affecting the enforcement of creditors' rights; and (ii)
the delivery and endorsement by Borrower of such Pledged Note Receivable in the
manner prescribed herein, the execution and delivery to Lender of a
corresponding Pledge and Assignment of Note Receivables and Purchase Agreements
in the form of Exhibit "B" hereto, and the recordation of such Pledge and
Assignment of Notes Receivable and Purchase Agreements and a corresponding UCC-1
financing statement in the Newport Land Evidence Records, together with the
filing of such UCC-1 financing statement with the Rhode Island Secretary of
State, will create in favor of Lender a valid and perfected continuing first
priority Lien and security interest in and to such Pledged Note Receivable;
(t) The Pledged Note Receivable and mortgage (if any), federal
truth-in-lending disclosure statement, Purchase Agreement, owner's
acknowledgment, certificate of title, and other documents and instruments
relating to the Interval purchase transaction giving rise to such Pledged Note
Receivable are genuine, valid, and legally enforceable in accordance with their
respective terms, and Borrower has not assigned or otherwise transferred any
right, title, or interest in and to any such document or instrument other than
to Lender; and
(u) The Pledged Note Receivable is free and clear of any
Liens, security interests, adverse claims, and other encumbrances of any type.
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9
1.29 Encumbered Interval. Any Interval that is encumbered by the Lien
of the Resort Mortgage.
1.30 Encumbered Personal Property. All (i) furniture, furnishings,
fixtures, appliances, equipment, inventory, supplies, and other tangible
personal property that is owned by Borrower and located upon any Mortgaged Real
Property, used or useful in connection with the ownership, use, operation,
construction, improvement, or repair of any Mortgaged Real Property (the
"Tangible Personal Property"); and (ii) accounts, chattel paper, contract
rights, documents, instruments, general intangibles, and other intangible
personal property associated in any way with the Mortgaged Real Property or the
Tangible Personal Property, including but not limited to:
(a) Deposits made by third parties (including tenants'
security deposits and escrow deposits under contracts of sale);
(b) Impound accounts for the payment of taxes, insurance, and
other expenses, funds deposited with Lender under the Resort Mortgage, and
insurance policies relate to the Mortgaged Real Property or the Tangible
Personal Property;
(c) All refundable or reimbursable fees, deposits, and other
funds or evidences of credit or indebtedness now or hereafter deposited with
respect to any portion of the Mortgaged Real Property or Tangible Personal
Property with any governmental authority or other person or entity, including,
without limitation, all tap fees, utility deposits, deposits on construction or
materials contracts, commitment fees, and development costs;
(d) All chattel paper, general intangibles, accounts, accounts
receivable, choses-in-action, causes of action, and contract rights evidencing
or representing obligations of any kind at any time due and/or owing Borrower
and all rights of Borrower to receive payment or other consideration, including
but not limited to that related to purchase money indebtedness owing to Borrower
in connection with condominium unit or timeshare interest sales contracts or any
other sales of all or any portion of the Mortgaged Real Property or Tangible
Personal Property, and all escrow agreements and security related thereto;
(e) All plans and specifications, shop drawings, bonds,
construction contracts, architect/engineer agreements, utility contracts,
management agreements, maintenance contracts, equipment leases, warranties,
service contracts, reservation agreements, and other contracts and agreements of
any and every kind that relate to the ownership, use, operation, construction,
improvement, or repair of the Mortgaged Real Property or the Tangible Personal
Property;
(f) All water stock and water and utility rights that relate
to the Mortgaged Real Property or Tangible Personal Property;
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10
(g) All trade names, trademarks, service marks, and copyrights
used in connection with the ownership, use, and/or operation of all or any
portion of the Mortgaged Real Property or Tangible Personal Property, together
with any goodwill associated therewith; and
(h) All permits (including, without limitation, building
permits), licenses, franchises, surveys, certificates, and other rights and
privileges issued or obtained in connection with the ownership, use, operation,
construction, improvement, and/or repair of the Mortgaged Real Property or
Tangible Personal Property;
whether now owned or hereafter acquired by Borrower, together with all
improvements, replacements, substitutions, and accessions thereto and
substitutions and replacements thereof and the cash and non-cash proceeds of all
of the foregoing, a Lien against which constitutes Collateral for the Loan.
1.31 Environmental Laws. The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time ("CERCLA"),
the Resource Conservation and Recovery Act of 1976, as amended from time to time
("RCRA"), the Superfund Amendments and Reauthorization Act of 1986, as amended,
the federal Clean Air Act, the federal Clean Water Act, the federal Safe
Drinking Water Act, the federal Toxic Substances Control Act, the federal
Hazardous Materials Transportation Act, the federal Emergency Planning and
Community Right to Know Act of 1986, the federal Endangered Species Act, the
federal Occupational Safety and Health Act of 1970, the federal Water Pollution
Control Act, and any and all comparable statutes or ordinances enacted in the
State of Rhode Island, as all of the foregoing laws may be amended from time to
time, and any rules or regulations promulgated pursuant to the foregoing;
together with any similar local, state or federal statutes, ordinances, rules,
or regulations, either in existence as of the date hereof or enacted or
promulgated after the date of this Agreement, that concern the management,
control, storage, discharge, treatment, containment, removal, and/or transport
of Hazardous Materials or other substances that are or may become a threat to
public health or the environment; together with any common law theory involving
Hazardous Materials or substances that are (or alleged to be) hazardous to human
health or the environment, based on nuisance, trespass, negligence, strict
liability, or other tortious conduct, or any other federal, state, or local
statute, ordinance, regulation, rule, policy, or determination pertaining to
health, hygiene, the environment, or environmental conditions.
1.32 Event of Default. Defined in Section 7 of this Agreement.
1.33 Exchange Company. Resort Condominiums International, Inc.
1.34 Financial Statements. The tax returns, balance sheets, and
statements of income and expense of Borrower and each Guarantor and the related
notes and schedules delivered by Borrower prior to the Closing Date, together
with the financial statements and reports of Guarantors delivered to Lender
prior to the Closing Date; and the monthly, quarterly, and annual financial
statements and reports required to be provided to Lender pursuant to Section
6.1(g) hereof.
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11
1.35 GAAP. Generally accepted accounting principles, applied on a
consistent basis, as described in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board which are applicable under the
circumstances as of the date in question.
1.36 Guarantors. Equivest and ERC, together with their respective
successors and assigns, jointly and severally.
1.37 Guaranty. The Mortgage Payment Guaranty and/or the Receivables
Payment Guaranty.
1.38 Hazardous Materials. "Hazardous substances," "hazardous waste,"
"hazardous constituents," "toxic substances," or "solid waste," as defined in
the Environmental Laws, and any other contaminant or any material, waste, or
substance that is petroleum or petroleum based, asbestos, polychlorinated
biphenyls, flammable explosives, or radioactive materials.
1.39 Hazardous Materials Indemnity Agreement. That certain Hazardous
Materials Indemnity Agreement of even date herewith executed by Guarantors in
favor of Lender.
1.40 Improvements. All Units, Common Areas, and other buildings,
structures, recreational facilities, and appurtenances thereto now located on,
or to be constructed on, any Mortgaged Real Property.
1.41 Interest Rate. The Base Rate plus 3.00% per annum. The Interest
Rate charged for each one (1) month period shall be fixed based upon the Base
Rate published or otherwise determined prior to and in effect as of the third
(3rd) Business Day following the tenth (10th) day of each calendar month. The
Interest Rate shall be calculated based on a three hundred sixty (360) day year
and charged for the actual number of days elapsed.
1.42 Interval. An Interval Interest, as such term is defined in the
Timeshare Declaration, together with all rights, benefits, privileges, and
interests appurtenant thereto, including but not limited to the right to use and
occupy a Unit within the Resort and the Common Areas and Common Furnishings
appurtenant to such Unit and/or the Resort during a reserved or assigned
Interval Week (as such term is defined in the Timeshare Declaration) or other
use period, all as more specifically described in the Declarations and the other
Timeshare Documents.
1.43 Land. The real property upon which any portion of the Resort is
situated.
1.44 Lien. Any mortgage, security interest, encumbrance, or other
interest in property securing an obligation owed to, or valid claim by, a Person
other than the owner of such property, whether such interest arises in equity or
is based on common law, statute, or contract.
<PAGE>
12
1.45 Loan. The subject credit facility, including the Mortgage
Component and the Receivables Component, in the maximum aggregate principal
amount of $11,500,000 as described in this Agreement and evidenced and secured
by the Loan Documents.
1.46 Loan Documents. Collectively, the following documents and
instruments, as each may be amended, renewed, extended, restated, or
supplemented from time to time:
(a) This Agreement;
(b) The Receivables Note;
(c) The Mortgage Note;
(d) The Receivables Payment Guaranty;
(e) The Mortgage Payment Guaranty;
(f) The Resort Mortgage;
(g) The Pledge and Assignment of Notes Receivable and Purchase
Agreements (in the form of Exhibit "B," attached hereto and incorporated herein
by this reference);
(h) The Custodial Agreement;
(i) The Lockbox Agreement;
(j) The Servicing Agreement;
(k) The Hazardous Materials Indemnity Agreement;
(l) The Collateral Assignment of Management Agreement;
(m) The Collateral Assignment of Certificates, Permits,
Licenses, Approvals, Bonds, and Warranties;
(n) The Collateral Assignment of Declarant's Rights Under
Declarations and Bylaws;
(o) UCC-1 and, if appropriate, UCC-3 financing statements
covering the Collateral, to be recorded in the Newport Land Evidence Records and
filed with the Rhode Island Secretary of State and with the Secretary of State
of any other jurisdiction deemed appropriate by Lender, in its sole discretion;
and
<PAGE>
13
(p) All such other assignments, agreements, documents,
instruments, certificates, and materials as Lender may require in order to
evidence or secure the Obligations, to evidence and perfect the rights, Liens,
and security interests of Lender contemplated by the Loan Documents, and
otherwise to effectuate the transactions contemplated hereby.
1.47 Lockbox Agent. Seafirst Bank or such other Person as Lender
engages, in its sole discretion, at Borrower's sole cost and expense, as
Lender's exclusive agent to receive, deposit, and disburse all amounts paid by
or on behalf of each Purchaser or other obligor pursuant to any Pledged Note
Receivable to which such Purchaser or other obligor is a party.
1.48 Lockbox Agreement. That certain agreement by and among Lender,
Borrower, and Lockbox Agent in substantially the form of Exhibit "C," attached
hereto and incorporated herein by this reference, pursuant to which Lockbox
Agent is engaged, at Borrower's sole cost and expense, as Lender's exclusive
agent to receive, deposit, and disburse all amounts paid by each Purchaser or
other obligor pursuant to any Pledged Note Receivable to which such Purchaser or
other obligor is a party.
1.49 Mandatory Prepayment. Any prepayment of the Loan required by
Section 2.5 of this Agreement.
1.50 Maturity Date. The earlier to occur of (a) the date as of which a
registered public offering of the common stock of Equivest or any other
Affiliate of Borrower closes; or (b) December 11, 1998.
1.51 Minimum Monthly Interest Payment. The total amount of interest
computed at the Interest Rate that has accrued on the outstanding principal
balance of the Receivables Note during the period of time commencing on the
eleventh (11th) day of the immediately preceding calendar month and terminating
on the tenth (10th) day of the subject calendar month and payable to Lender
pursuant to Section 2.5(b)(ii) hereof.
1.52 Minimum Net Worth Requirement. An aggregate Tangible Net Worth of
Borrower and Guarantors on a consolidated basis of at least $35,000,000.
1.53 Minimum Quarterly Net Income Requirement. A pre-tax net income of
Equivest, determined in accordance with GAAP, consistently applied, without
taking into consideration any amounts paid or payable to Equivest by any
Affiliate thereof, of not less than $2,500,000 for the three (3) calendar month
period from September 1, 1998, through and including November 30, 1998, and for
each subsequent three (3) calendar month period thereafter.
1.54 Mortgage Component. That portion of the Loan evidenced by the
Mortgage Note.
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14
1.55 Mortgage Component Advance. The proceeds of the Mortgage Component
of the Loan advanced by Lender to Borrower on or about the Closing Date in
accordance with the terms, provisions, and conditions of this Agreement.
1.56 Mortgage Note. That certain Mortgage Promissory Note that
evidences the Mortgage Component of the Loan, dated as of the Closing Date, in
the original principal amount of SIX MILLION FIVE HUNDRED THOUSAND DOLLARS
($6,500,000), made and executed by Borrower to the order of Lender and delivered
to Lender concurrently with Borrower's and Guarantors' execution of this
Agreement.
1.57 Mortgage Payment Guaranty. That certain Mortgage Payment Guaranty
of even date herewith executed by Guarantors in favor of Lender, pursuant to
which Guarantors absolutely and unconditionally guarantee payment of any and all
amounts due Lender in connection with the Mortgage Component of the Loan,
pursuant to the Loan Documents.
1.58 Mortgaged Real Property. All of Borrower's now owned or hereafter
acquired right, title, and interest in and to any Land, Unit, Common Area,
Interval, and other real property of any and every type, together with all
easements, rights-of-way, and other appurtenances thereto, that is encumbered by
the Lien of the Resort Mortgage.
1.59 Note Receivable. An Interval Interest Promissory Note that, as of
the Cut-Off Date, was pledged to RFI as partial security for a loan from RFI to
Borrower and is made and executed by a Purchaser to the order of and in favor of
Borrower in connection with such Purchaser's acquisition of an Interval in a
Unit within the Resort.
1.60 Obligations. All present and future indebtedness, liabilities,
obligations, and responsibilities, both financial and otherwise, to which
Borrower is subject under any of the Loan Documents, whether direct or indirect,
absolute or contingent, including but not limited to all amounts due or becoming
due to Lender in respect of the Loan or any of the Loan Documents, including
principal, interest, prepayment premiums, contributions, taxes, insurance
premiums, loan charges, custodial fees, attorneys' and paralegals' fees and
expenses and other fees or expenses incurred by Lender or advanced to or on
behalf of Borrower by Lender, pursuant to any of the Loan Documents or in
connection with Lenders enforcement of the prompt and complete payment and
performance by Borrower and Guarantors of all indebtedness, liabilities,
obligations, and responsibilities owed by Borrower, pursuant to this Agreement,
any of the other Loan Documents, or otherwise.
1.61 Payment Authorization Agreement. The pre-authorized debit
agreement (or provision of a Note Receivable containing same) executed by a
Purchaser that provides for the direct debit payment of installments due on a
Note Receivable to Lender.
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15
1.62 Permitted Liens and Encumbrances. Those liens and encumbrances
affecting all or any portion of the Collateral to which Lender consents in
writing, as set forth on Exhibit "D," attached hereto and incorporated herein by
this reference, as amended or restated from time to time.
1.63 Person. A natural person, corporation, partnership, limited
liability company, joint venture, association, estate, trust, government,
governmental subdivision or agency, other legal entity, or any combination
thereof.
1.64 Phase I Environmental Inspection. A Phase I environmental
assessment of the Resort, including, without limitation, the relevant Land and
all improvements thereto. In the event that any Phase I Environmental Assessment
of the Resort is unacceptable to Lender for any reason or is not available,
Borrower shall provide Lender with a written report or reports covering the
Resort, prepared by one (1) or more appropriate licensed professionals
acceptable to Lender, which confirm(s):
(a) The absence of any Hazardous Materials of any kind or
nature at the Resort, except for: (i) such Hazardous Materials as may be
generated, used, stored, or transported in connection with the permitted uses of
the Mortgaged Real Property and then only to the extent permitted by law after
obtaining all necessary permits and licenses therefor; and (ii) those Hazardous
Materials that are described in that certain Settlement Agreement and Covenant
Not to Sue by and between Borrower and the State of Rhode Island Department of
Environmental Management, Division of Site Remediation, recorded on December 6,
1995, in the Newport Land Evidence Records in Book 707, at Page 115 (the
"Settlement Agreement"); and
(b) That the applicable engineering firm has obtained,
reviewed, and included within its report a CERCLIS printout from the
Environmental Protection Agency (the "EPA"), statements from the EPA and other
applicable territorial and local authorities, and such other information as
Lender may reasonably require, all of which information shall confirm that there
is no known or suspected hazardous or toxic waste located at the Resort or in
such proximity thereto as to create a material risk of contamination of all or
any portion of the Collateral.
1.65 Plans. Detailed as-built plans for the development and
construction of the Improvements, together with all specifications and drawings
in respect thereof and all modifications, amendments, additions, and supplements
thereto. Said Plans, which shall be prepared by an Architect, shall indicate the
location of the Improvements, the configuration and dimensions of the Resort,
the means of access thereto, street lines, easements, any relevant Common Areas,
and other relevant details.
1.66 Pledged Note Receivable. A Note Receivable that has been and
remains pledged to Lender by Borrower, pursuant to this Agreement or any of the
other Loan Documents. For purposes hereof, the term "Pledged Note Receivable"
shall include the related Purchase Agreement executed by the maker(s) of such
Pledged Note Receivable.
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1.67 Purchase Agreement. A Purchase and Sale Agreement, pursuant to
which a Purchaser agrees to purchase an Interval from Borrower and Borrower
agrees to sell such Interval to such Purchaser.
1.68 Purchase Price. The total actual purchase price of an Interval as
set forth in a Purchaser's Purchase Agreement.
1.69 Purchaser. Any Person who acquires one (1) or more Intervals.
1.70 Receivables Component. That portion of the Loan evidenced by the
Receivables Note.
1.71 Receivables Component Advance. The proceeds of the Receivables
Component of the Loan advanced by Lender to Borrower on or about the Closing
Date in accordance with the terms, provisions, and conditions of this Agreement.
1.72 Receivables Note. That certain Receivables Promissory Note that
evidences the Receivables Component of the Loan, dated as of the Closing Date,
in the original principal amount of FIVE MILLION DOLLARS ($5,000,000), made and
executed by Borrower to the order of Lender and delivered to Lender concurrently
with Borrower's and Guarantors' execution of this Agreement.
1.73 Receivables Payment Guaranty. That certain Receivables Payment
Guaranty of even date herewith executed by Guarantors in favor of Lender,
pursuant to which Guarantors absolutely and unconditionally guarantee payment of
any and all amounts due Lender in connection with the Receivables Component of
the Loan, pursuant to the Loan Documents.
1.74 Resort. Long Wharf Resort, including any and all improved and
unimproved real and personal property that comprises or is located at same,
including but not limited to the Land, the Units, the Common Areas, the Common
Furnishings, and the Intervals. For purposes of this Agreement and the other
Loan Documents, the terms "Resort," shall include the Resort Condominium Regime
and any property, whether or not described in one (1) of the Declarations, that
is or may be managed or operated in conjunction with the management or operation
of the Resort Condominium Regime, whether for transient hotel purposes or
otherwise.
1.75 RFI. Resort Funding, Inc., a Delaware corporation, formerly known
as Bennett Funding International, Ltd. ("Bennett").
1.76 Resort Condominium Regime. Long Wharf Resort Condominium.
1.77 Resort Mortgage. That certain Mortgage, Security Agreement, and
Assignment of Leases and Rents of even date herewith, executed by Borrower in
favor of Lender and to be recorded
<PAGE>
17
in the Newport Land Evidence Records, as amended from time to time, which
creates a valid and enforceable first priority Lien against the Mortgaged Real
Property and other real and personal property described therein and secures in
part the payment of all principal, interest, and other amounts owed by Borrower
to Lender, pursuant to the Loan Documents.
1.78 Servicing Agent. Wynwood Agency, Inc. or such other Person as
Lender engages, in its reasonable discretion, at Borrower's sole cost and
expense, to service each Consumer Loan, all in accordance with the terms,
provisions, and conditions of the Servicing Agreement.
1.79 Servicing Agreement. That certain Servicing Agreement of even date
herewith by and among Borrower, Lender, and Servicing Agent in substantially the
form of Exhibit "E," attached hereto and incorporated herein by this reference,
that provides for the servicing of each Consumer Loan.
1.80 Survey. An as-built survey of the Resort prepared in accordance
with the ALTA/ACSM 1988 Minimum Survey Requirements by a licensed surveyor and
certified by such surveyor to Borrower and the Title Insurance Company.
1.81 Tangible Net Worth. The amount by which the aggregate value of
Borrower's and Guarantors' assets, as determined in accordance with GAAP,
consistently applied, less the sum of (a) the aggregate value of all assets of
Borrower and Guarantors that would be classified as non-identifiable intangible
assets under GAAP, including, without limitation, goodwill; and (b) the
aggregate value of all assets of Borrower and Guarantors that represent amounts
paid or payable to Borrower or any Guarantor by any Affiliate thereof, exceeds
the aggregate liabilities of Borrower and Guarantors, as determined in
accordance with GAAP, consistently applied.
1.82 Timeshare Association. Longwharf Interval Owners' Association, a
Rhode Island unincorporated association.
1.83 Timeshare Construction Credit Facility. The $30,000,000 timeshare
construction credit facility as evidenced in part by that certain Loan and
Security Agreement dated as of November 14, 1997, by and among RFI, Equivest,
and Lender (the "Timeshare Construction Credit Facility Loan Agreement").
1.84 Timeshare Declaration. That certain Declaration of Covenants and
Restrictions of Interval Ownership dated December 30, 1996, and recorded on
December 30, 1996, in the Newport Land Evidence Records in Book 749, at Page
369, together with any amendments, supplements, or restatements thereof,
including but not limited to any Supplemental Declaration, as such term is
defined in the Timeshare Declaration.
1.85 Timeshare Documents. The Condominium Declaration, the Timeshare
Declaration, the bylaws and rules and regulations of the Condominium Association
and the Timeshare Association,
<PAGE>
18
and all other documents and instruments relating to the Resort, the
Associations, and/or the Units, Common Areas, Common Furnishings, or Intervals
thereat, including but not limited to public offering statements, Purchase
Agreements, promissory notes, federal truth-in-lending disclosures, exchange
company affiliation and membership agreements, advertising and promotional
materials of any and every type, contracts and agreements to which any
Association is subject, and any and all other documents, instruments, and other
materials used, directly or indirectly, in connection with the marketing, sale,
and financing of such Intervals. Each Timeshare Document shall be in form and
content acceptable to Lender, in its sole discretion. Lender shall have received
and approved true, correct, and complete copies of all Timeshare Documents as a
condition precedent to any Advances hereunder.
1.86 Timeshare Receivables Hypothecation Facility. The $75,000,000
timeshare receivables hypothecation facility as evidenced in part by that
certain Loan and Security Agreement dated as of February 11, 1998, by and among
RFI, Equivest, and Lender (the "Timeshare Receivables Hypothecation Facility
Loan Agreement").
1.87 Timeshare Receivables Purchase Facility. The $75,000,000 timeshare
receivables credit facility as evidenced in part by that certain Assignment,
Release and Custodial Agreement dated on or about November 13, 1997, by and
among Lender, RFI, BFICP Corporation, ING (U.S.) Capital Corporation, ING (U.S.)
Capital Markets, Inc., Holland Limited Securitization, Inc., First Trust of New
York, N.A., and Concord Servicing Corporation, together with any and all related
contemporaneous or subsequent transactions involving Lender and RFI, among other
parties.
1.88 Title Insurance Company. Chicago Title Insurance Company or such
other title insurance company as is acceptable to Lender, in its sole
discretion.
1.89 Title Policy. Defined in Section 4.1(h) of this Agreement.
1.90 Unit. A Condominium Unit, as such term is defined in the
Condominium Declaration and the Timeshare Declaration, including but not limited
to an Interval Ownership Suite, together with all related Common Areas, Common
Furnishings, easements, and other appurtenances thereto. The term "Unit" shall
include any "resort amenity units," as such term is hereinafter defined in any
amendment to or supplement of August 16, 1998 either Declaration.
1.91 Unit Release Fee. A mandatory payment of the greater of (a)
$135,000; or (b) one hundred twenty percent (120%) of the original principal
amount of the Mortgage Component of the Loan divided by the total number of
Units encumbered by the Resort Mortgage as of the Closing Date less the number
of Units listed on Exhibit "F" hereto, due Lender upon the sale of the first
Interval in such Unit or otherwise in accordance with the provisions of Section
2.4(a)(ii) hereof.
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19
SECTION 2. THE LOAN
Lender hereby agrees to make the Loan in accordance with all of the
terms, provisions, and conditions hereof and of the other Loan Documents.
2.1 Purposes.
(a) Mortgage Component. The proceeds of the Mortgage Component
of the Loan shall be used exclusively to (i) repay in full Borrower's
acquisition and development loan from RFI in the original principal amount of
$9,500,000, pursuant to that certain Acquisition and Development Loan Agreement
dated April 8, 1997, by and between RFI and Borrower, as amended or supplemented
from time to time, together with any and all related documents or instruments
that evidence or secure said loan (the "RFI Acquisition/Development Loan"); and
(ii) pay all amounts described in Section 6.1(p) hereof.
(b) Receivables Component. The proceeds of the Receivables
Component of the Loan shall be used exclusively to repay in full Borrower's
receivables loan from RFI in the original principal amount of $3,000,000,
pursuant to that certain Hypothecation Loan Agreement dated October 3, 1995, by
and between Bennett and Borrower, as amended or supplemented from time to time,
together with any and all related documents or instruments that evidence or
secure said loan (the "RFI Receivables Loan").
2.2 Advances.
(a) Mortgage Component of the Loan. Upon the terms and
provisions and subject to the conditions set forth in this Agreement, and
provided that no Event of Default has occurred, a maximum of $6,500,000 shall be
disbursed by Lender to Borrower on or about the Closing Date as the sole and
exclusive Advance of the Mortgage Component of the Loan; provided, however that
(A) in the event that the total amount, including principal and accrued but
unpaid interest, owed by or on behalf of Borrower to RFI in connection with the
RFI Acquisition/Development Loan (the "RFI Acquisition/Development Payoff
Amount") is less than $6,500,000 as of the Closing Date, then Lender's Advance
of the Mortgage Component of the Loan shall be limited to the amount of the RFI
Acquisition/Development Payoff Amount; and (B) in the event that the RFI
Acquisition/ Development Payoff Amount exceeds the maximum original principal
amount of the Mortgage Component of the Loan (i.e., $6,500,000), then Borrower
shall pay the amount by which the RFI Acquisition/Development Payoff Amount
exceeds $6,500,000 to RFI on the Closing Date. The proceeds of the Mortgage
Component of the Loan will be disbursed by Lender solely for the purposes set
forth in Section 2.l(a) hereof. Once borrowed and repaid, proceeds of the
Mortgage Component of the Loan may not be reborrowed.
(b) Receivables Component of the Loan. Upon the terms and
provisions and subject to the conditions set forth in this Agreement, and
provided that no Event of Default has
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20
occurred, a maximum of the lesser of (A) the Borrowing Base as of the Cut-Off
Date; or (B) $5,000,000 shall be disbursed by Lender to Borrower on or about the
Closing Date as the sole and exclusive Advance of the Receivables Component of
the Loan. The proceeds of the Receivables Component of the Loan will be
disbursed by Lender solely for the purposes set forth in Section 2.1(b) hereof.
Once borrowed and repaid, proceeds of the Receivables Component of the Loan may
not be reborrowed.
2.3 Interest Rate. The aggregate principal amount of all Advances of
the Mortgage Component and the Receivables Component of the Loan that are
outstanding from time to time shall bear interest at a rate equal to the
Interest Rate. The average monthly outstanding principal balance of the Loan
shall bear interest in arrears as of Lender's wiring of funds through its actual
receipt of repayment of the Loan (if received by Lender later than 12:00 noon
New York time, then interest accrual shall be through the next Business Day
following such receipt). Immediately upon the occurrence of an Event of Default,
any and all principal and other amounts owed Lender hereunder or pursuant to the
Mortgage Note, the Receivables Note, or any of the other Loan Documents may, in
Lender's sole discretion, bear interest at the Default Rate.
2.4 Payments. Borrower agrees punctually to pay or cause to be paid to
Lender, via wire transfer, all principal and interest due under the Note or
otherwise in respect of the Loan. In particular, Borrower shall make the
following payments on the Loan:
(a) Mortgage Component of the Loan.
(i) Monthly. Borrower shall pay, in arrears, on or
before the eleventh (11th) day of each calendar month (each such day is
hereinafter referred to as a "Payment Date"), commencing on September 11, 1998,
the total amount of interest, as calculated at the Interest Rate, that has
accrued on the outstanding principal balance of the Mortgage Note during the
period of time commencing on the eleventh (11th) day of the immediately
preceding calendar month and terminating on the tenth (10th) day of the subject
calendar month (the "Accrual Period"). If the eleventh (11th) day of a
particular calendar month is not a Business Day, then such month's Payment Date
shall be the immediately succeeding Business Day.
(ii) Unit Release Fees. On or before the eleventh
(11th) day of each calendar month, commencing on September 11, 1998, Borrower
shall pay Lender, via wire transfer, an amount equal to the aggregate Unit
Release Fees to which Lender is entitled based on whatever Intervals were sold
by Borrower during the immediately preceding calendar month. For purposes
hereof, an Interval shall be deemed sold upon the payment in full of the down
payment required by the applicable Purchase Agreement and the expiration of any
applicable cancellation or rescission period to which the Purchaser is entitled
pursuant to applicable law. Payment of such Unit Release Fees shall be
accompanied by a detailed list of the corresponding Intervals sold during the
applicable calendar month and the Purchase Prices thereof. Such Unit Release
Fees shall be applied by Lender to reduce the outstanding principal balance of
the Mortgage Component of the Loan and shall
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21
continue to be paid by Borrower until the Mortgage Note, including all interest,
principal, and other amounts due thereunder, has been paid in full. Upon
Lender's receipt of a Unit Release Fee with respect to a particular Unit and
provided that no Event of Default has occurred hereunder or pursuant to any of
the other Loan Documents, Lender shall grant a partial release of such Unit from
the Lien of the Resort Mortgage; provided, however, that Lender shall not be
obligated to grant partial releases with respect to any commercial or resort
amenity units until all of the Obligations have been satisfied in full. Lender
shall also grant partial releases from the Lien of the Resort Mortgage for no
consideration upon the conveyance to the Timeshare Association of the Units
listed in Exhibit "F," attached hereto and incorporated herein by this
reference, with respect to which Borrower has already paid a partial release fee
to RFI prior to the Closing Date. Borrower shall bear all costs and expenses of
preparing and recording whatever documents and instruments are necessary in
order to effect all such partial releases, which documents and instruments shall
be in form and substance acceptable to Lender, in its sole discretion.
(iii) Application of Funds. Except as otherwise
specifically provided, all amounts received by Lender pursuant to this Section
2.4(a) shall be applied by Lender in the following order of priority (A) first,
to reimburse Lender for all costs, expenses, and other amounts due Lender
hereunder or pursuant to the other Loan Documents other than principal and
interest; (B) second, to pay Lender all accrued but unpaid interest due under
the Mortgage Note; and (C) third, to reduce the outstanding principal balance of
the Mortgage Component of the Loan.
(b) Receivables Component of the Loan.
(i) Lockbox Account. Prior to the Closing Date,
Borrower shall have directed or otherwise caused the makers of each Note
Receivable, in writing, to pay directly to Lockbox Agent all interest,
principal, prepayments (both voluntary and mandatory), and other amounts of any
and every description payable to Borrower by or on behalf of such maker pursuant
to the applicable Note Receivable, the related Purchase Agreement, or any other
related documents or instruments. Such amounts shall be deposited by Lockbox
Agent into the lockbox account established and maintained by Lockbox Agent in
accordance with the provisions of the Lockbox Agreement (the "Lockbox Account").
Borrower shall immediately pay any and all amounts paid to or otherwise received
from time to time by Borrower in connection with a Consumer Loan, including but
not limited to any amounts received by Borrower upon its realization upon any
collateral for a Consumer Loan (which amounts shall be deemed received in trust
for the sole and exclusive benefit of Lender), to Lockbox Agent, as and when
such amounts are received by Borrower (and in the form so received, properly
endorsed to Lockbox Agent, if appropriate). In accordance with the terms and
provisions of the Lockbox Agreement, by 5:00 p.m. New York time on each Friday
prior to the Maturity Date, Lockbox Agent shall remit, via wire transfer, all
amounts then deposited in the Lockbox Account to Lender.
(ii) Application of Funds. All amounts received by
Lender pursuant to Section 2.4(b)(i) above shall be applied by Lender in the
following order of priority (A) first, to
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22
reimburse Lender for all costs, expenses, and other amounts due Lender hereunder
or pursuant to the other Loan Documents other than principal and interest,
including but not limited to Servicing Agent's fees and Custodian's fees; (B)
second, to pay Lender all accrued but unpaid interest due under the Receivables
Note; and (C) third, to reduce the outstanding principal balance of the
Receivables Component of the Loan.
(iii) Minimum Monthly Interest Payment.
Notwithstanding any provision of this Section 2.4(b) or any other term,
provision, or condition hereof or of any other Loan Document to the contrary, on
or before the eleventh (11th) day of each calendar month, commencing on
September 11, 1998, Borrower shall pay Lender, via wire transfer, in arrears,
the Minimum Monthly Interest Payment due with respect to the period of time
commencing on the eleventh (11th) day of the immediately preceding calendar
month and terminating on the tenth (10th) day of the subject calendar month (the
"Accrual Period"), to the extent that said Minimum Monthly Interest Payment
exceeds the sum of all amounts received by Lender from Borrower during such
Accrual Period, pursuant to Section 2.4(b)(i) hereof.
(c) Final Payment. Notwithstanding any term, provision, or
condition hereof to the contrary, the entire outstanding principal balance of
the Mortgage Component of the Loan and the Receivables Component of the Loan,
together with any and all accrued but unpaid interest thereon and all other
Obligations, shall immediately be paid via wire transfer by Borrower to Lender
and otherwise be satisfied in full on or before the earlier to occur of (i) an
Event of Default hereunder; or (ii) the Maturity Date.
2.5 Prepayments.
(a) Mortgage Component of the Loan. Borrower may prepay the
Mortgage Component of the Loan, in whole or in part, without premium or penalty,
upon ten (10) Business Days' prior written notice to Lender.
(b) Receivables Component of the Loan.
(i) Voluntary. Borrower may prepay the Receivables Component
of the Loan, in whole or in part, without premium or penalty, upon ten (10)
Business Days' prior written notice to Lender.
(ii) Mandatory.
(A) If at any time and for any reason, the
outstanding unpaid principal balance of the Receivables Note exceeds the
Borrowing Base, then, within five (5) days following Borrower's receipt of
telecopied notice from Lender of the occurrence of such excess over the
Borrowing Base or, absent such telecopied notice, within fifteen (15) days after
the end of the calendar month in which such excess first occurred, Borrower
shall prepay the outstanding principal
<PAGE>
23
balance of the Receivables Note in an amount equal to the difference between the
outstanding principal balance of the Receivables Note and the Borrowing Base.
(B) In the event that a Pledged Note Receivable
ceases for any reason to be an Eligible Note Receivable at any time, then
Borrower shall, within thirty (30) days following the date as of which such
ineligible status occurs, prepay the Receivables Note in an amount equal to the
unpaid principal balance of the applicable Pledged Note Receivable.
(c) Timing of Voluntary Prepayments. Notwithstanding any
provision of this Section to the contrary, voluntary prepayments of the Mortgage
Note or the Receivables Note may occur on Payment Dates only; provided, however,
that such a prepayment may occur on an earlier date, as long as the total amount
thereof includes interest on the outstanding principal balance of the Mortgage
Note or the Receivables Note, as appropriate, through and including the last day
of the Accrual Period in which such prepayment occurs.
2.6 Guaranty. Payment and performance by Borrower of one hundred
percent (100%) of all of the Obligations shall be unconditionally guaranteed by
Guarantors.
SECTION 3. COLLATERAL
3.1 Grant of Security Interest. To secure the prompt and complete
payment and performance when due of all of the Obligations, for value received,
Borrower hereby unconditionally and irrevocably assigns, pledges, and grants to
Lender a continuing first priority Lien and security interest in and to the
Collateral.
3.2 Security Interest in All Pledged Notes Receivable. In connection
with the Receivables Component of the Loan, notwithstanding that Lender is
obligated, subject to the terms and conditions set forth herein and in the other
Loan Documents, to make an Advance in respect of Eligible Notes Receivable only,
Lender shall have a continuing first priority Lien and security interest in and
to all of the Pledged Notes Receivable and may collect and shall receive all
payments made under or in respect of all Pledged Notes Receivable, including
Eligible Notes Receivable that may become ineligible, until any of the same are
released by Lender, if at all, pursuant to Section 11.10 below.
3.3 Financing Statements. Borrower agrees, at its own expense, to
execute the UCC-1 and (if necessary or appropriate, in Lender's sole discretion)
UCC-3 financing statements provided for by the Code, together with any and all
other appropriate instruments and documents, and to take such other action as
may be required, in Lenders reasonable judgment, in order to perfect and to
continue the perfection of Lender's first priority Liens and security interests
in the Collateral. In addition, unless prohibited by law, Borrower hereby
authorizes and grants to Lender a power of attorney to execute and file any such
financing statements on Borrower's behalf.
<PAGE>
24
3.4 Location of Collateral. Except for Encumbered Personal Property
that is replaced or under repair in the ordinary course of business, all
tangible Collateral (other than Collateral delivered to Lender or Custodian)
shall remain, at all times, within the Resort, and Borrower may not transfer or
cause the transfer of any such Collateral from such premises without the prior
written approval of Lender.
3.5 Protection of Collateral; Reimbursement.
(a) Pledged Notes Receivable and Related Documents. The
portion of the Collateral consisting of (i) the original Pledged Notes
Receivable; (ii) the original Purchase Agreements (including any addenda
thereto) related to such Pledged Notes Receivable; and (iii) originals or true
copies of the related truth-in-lending disclosure statements and, if required by
Lender, loan applications, any related Purchaser's or owner's acknowledgments
and understandings, certificates of title, public offering statement and other
receipts, Payment Authorization Agreements, and Exchange Company applications
and disclosures shall be delivered, at Borrower's expense, to Lender at its
address as set forth in Section 11.1 hereof and, except as otherwise expressly
provided herein to the contrary, held in Lender's possession, custody, and
control until all of the Obligations have been fully satisfied. Alternatively,
Lender, in its sole discretion, may elect for Custodian to accept delivery of
and maintain possession, custody, and control of all such documents and
instruments on behalf of Lender during such period of time. Each original
Pledged Note Receivable delivered to Lender shall be duly endorsed with the
words: "Pay to the order of Credit Suisse First Boston Mortgage Capital LLC,
together with its successors and assigns, with recourse."
(b) Storage; Liability. The portion of the Collateral
delivered to Lender or Custodian as described above shall be segregated by
Lender or Custodian, as the case may be, and stored in a secure, fire-resistant
filing cabinet, access to which is limited in a commercially reasonable manner.
Borrower and Guarantors agree that such storage is and shall be deemed to
constitute reasonable care by Lender with respect to such Collateral. Except to
the extent expressly included in the Custodian's fee as set forth in the
Custodial Agreement, all insurance and other expenses of protecting the
Collateral, including, without limitation, storing, warehousing, insuring,
handling, maintaining, and shipping the Collateral, and any and all excise,
property, intangible, sales, and use taxes imposed by any state, federal, or
local governmental authority on any of the Collateral or in respect of the sale
thereof shall be paid by Borrower. Any and all other amounts for which Borrower
may become liable hereunder and all costs and expenses (including reasonable
attorneys' and paralegals' fees, legal expenses, and court costs) that Lender
may incur in enforcing or protecting its Lien on, or rights and interest in, the
Collateral or any of its rights or remedies under this Agreement or any other
Loan Document or in respect to any of the transactions to be had hereunder or
thereunder, until paid by Borrower to Lender with interest at the Default Rate,
shall be included among the Obligations and, as such, shall be secured by all of
the Collateral. Provided that Lender or Custodian retains the original Pledged
Notes Receivable delivered to it in a secure, fire-resistant filing cabinet as
provided above, Lender shall not be liable or responsible in any way for the
safekeeping of any of the Collateral or for any loss or damage thereto or for
any diminution in the
<PAGE>
25
value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency, Lockbox Agent, Custodian, or any other Person whomsoever,
excluding damages or losses that occur as a result of Lender's gross negligence
or willful misconduct.
3.6 Cross-Collateralization and Default. The Collateral shall secure
all of the Obligations as well as the obligations of Borrower, any Guarantor, or
any Affiliate thereof pursuant to documents and instruments that evidence or
secure any other timeshare-related loan or credit facility between Lender,
Borrower, any Guarantor, or any Affiliate thereof, including but not limited to
the Bridge Loan Credit Facility, the Timeshare Construction Credit Facility, the
Timeshare Receivables Hypothecation Facility, and the Timeshare Receivables
Purchase Facility. All Liens, pledges, assignments, mortgages, security
interests, and other collateral granted to or for the benefit of Lender pursuant
to any documents or instruments that evidence or secure any such other loans or
facilities shall further secure Borrower's Obligations with respect to the Loan.
In addition, the Loan and such other loans and facilities shall be
cross-defaulted such that any event of default with respect to any such loan or
credit facility shall constitute an Event of Default hereunder, and vice versa.
SECTION 4. CONDITIONS PRECEDENT TO CLOSING AND FUNDING PROCEDURES
The obligation of Lender to enter into this Agreement and to make any
Advances of the Loan shall be subject to the complete satisfaction of each of
the conditions precedent set forth in the Commitment Letter, in addition to all
of the conditions precedent set forth below and elsewhere in the Loan Documents:
4.1 Conditions Precedent. On or prior to the Closing Date:
(a) Execution and Delivery. Borrower and Guarantors shall
execute and cause to be notarized, witnessed, and attested, as
appropriate, and delivered to Lender the Loan Documents, together with
such additional documents and certifications as Lender and its counsel
may reasonably require in order to ensure that all conditions precedent
to the closing of the Loan and the making of Advances hereunder have
been satisfied in all respects.
(b) Opinion of Borrower's and Guarantors' Counsel. Lender
shall have received from duly licensed outside counsel for Borrower and
each Guarantor acceptable to Lender such legal opinions, in form and
substance satisfactory to Lender, covering such items as may be
required by Lender, in its sole discretion, including, without
limitation, that the Loan Documents are valid, binding, and legally
enforceable in accordance with their terms and that they do not violate
any applicable usury or other Applicable Laws.
(c) Representations, Warranties, Covenants, and Agreements.
The representations and warranties contained in the Loan Documents and
in any certificates delivered to Lender in connection with the closing
shall be true and correct in all material respects, and all covenants
and agreements required to have been complied with and
<PAGE>
26
performed by Borrower shall have been fully complied with and performed
to the satisfaction of Lender.
(d) Borrower's and Guarantors' Background Documents. Borrower
shall have delivered to Lender, and Lender shall have approved each of
the following:
(i) Borrower's and Guarantors' Organizational
Documents. Copies of Borrower's and Guarantors' organizational
documents, including but not limited to their respective articles of
incorporation, bylaws, articles or organization, and operating
agreement (as appropriate), together with any amendments thereto,
certified to be true and complete by Borrower's and Guarantors'
respective Secretaries.
(ii) Good Standing Certificates. Current good
standing certificates for Borrower and Guarantors, issued by the Rhode
Island Secretary of State, the Florida Secretary of State, the Delaware
Secretary of State, and the Secretary of State of each other
jurisdiction in which Borrower or any Guarantor is required to be
legally qualified to conduct business, as appropriate.
(iii) Resolutions; Incumbency Certificates. A
certified authorization of the managing member of Borrower and
certified resolutions of Borrower's and Guarantor's boards of directors
authorizing the execution of all Loan Documents and the performance of
all Obligations thereunder. Such corporate resolutions shall be
accompanied by certificates from each relevant entity, signed by a duly
authorized officer thereof and dated as of the Closing Date, indicating
the incumbency, authority, and signatures of the officers of such
entity authorized to sign, on behalf of such entity, this Agreement and
the other Loan Documents to which such entity is a party.
(e) Financial Statements. Lender shall have received and
approved the Financial Statements required pursuant hereto to be delivered to
Lender, or otherwise required by Lender, for Borrower and Guarantors, all in
form and substance satisfactory to Lender.
(f) Proceedings Satisfactory. All actions taken in connection
with the execution and delivery of the Loan Documents, and all documents and
papers related thereto, shall be completely satisfactory to Lender and its
counsel. Lender and its counsel shall have received copies of all such
documents, instruments, and other items as Lender or its counsel may reasonably
request in connection therewith, all in form and substance satisfactory to
Lender and its counsel, in their sole discretion.
(g) Expenses. Borrower shall have paid all fees, expenses, and
other amounts required to be paid prior to or on the Closing Date, pursuant to
this Agreement and the Commitment Letter.
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27
(h) Title Policy. Borrower has delivered to Lender a
commitment to issue an ALTA extended coverage lender's policy of title insurance
insuring in favor of Lender, together with its successors and assigns, the first
priority of the Lien of the Resort Mortgage upon the Mortgaged Real Property,
including but not limited to the Encumbered Intervals, without exception for
filed or unfiled mechanics' liens or claims or for matters that an accurate
survey would disclose, subject only to such exceptions and conditions to title
as Lender shall have approved in writing and such affirmative coverage as Lender
deems reasonably necessary (the "Title Policy"). Such Title Policy shall be in
an amount not less than $11,500,000 and be issued by the Title Insurance
Company. A final title insurance policy issued and delivered to Lender based on
such commitment promptly following the Closing Date must insure that the Resort
Mortgage creates a first priority Lien in and to all of the Mortgaged Real
Property, including but not limited to the Encumbered Intervals, in favor of
Lender, together with its successors and assigns, with such exceptions and
conditions to title as Lender shall have approved in writing.
Such Title Policy shall contain such affirmative coverage as
Lender deems reasonably necessary, including but not limited to an affirmative
statement that the Title Policy insures Lender, together with its successors and
assigns, against all mechanics' and materialmen's liens arising from or out of
construction or renovation of the Improvements and, to the extent available and
commonly required by lenders in the State of Rhode Island, shall contain, in
form and substance acceptable to Lender: (A) an endorsement insuring against
matters that would be disclosed on an accurate survey of the Land; (B) an
endorsement insuring that no building restriction or similar exception to title
disclosed on the Title Policy has been violated and that any violation thereof
would not create or result in any reversion, reverter, or forfeiture of title;
(C) a zoning endorsement in the form typically issued in the State of Rhode
Island; (D) a usury endorsement; (E) a condominium endorsement; (F) an access
endorsement; (G) a contiguity endorsement; and (H) an endorsement insuring over
any environmental superlien or similar lien upon all or any portion of the
Resort. The condition of title to all Mortgaged Real Property and other
Collateral must be satisfactory to Lender in all respects, in its sole
discretion, as a condition precedent to Lender's obligation to make any Advances
hereunder.
(i) Survey. An original as-built survey, dated within ninety
(90) days prior to the Closing Date, satisfactory to Lender and prepared by a
licensed surveyor satisfactory to Lender and the Title Insurance Company in
accordance with Lender's requirements, of the Resort's Land and the land that
comprises the first phase of the Resort (the "First Phase Land"), showing the
location and dimensions of all Units, Common Areas, and other Improvements
thereto and indicating the routes of ingress and egress for public access to the
Resort, all utility lines, walks, drives, recorded or visible easements and
rights-of-way on such Land and First Phase Land, and showing that there are no
encroachments, improvements, projections, or easements (recorded or
unrecorded)on the property lines. Foundation perimeters are to be added to such
survey by the surveyor as soon as they are in place for all improvements for
which a certificate of occupancy (or its legal equivalent) has not been issued
as of the Closing Date. Such survey shall certify the acreage of the Land and
Phase One Land and shall indicate whether the Land or Phase One Land is located
within any flood hazard area. Such
<PAGE>
28
survey must be prepared in accordance with the standards set forth by ALTA/ACSM
and those of any and all surveyors' bureaus or associations of the State of
Rhode Island as well as any and all Applicable Laws and must be certified to
Lender and the Title Insurance Company. The surveyor's certificate placed on
such survey shall include a statement that said survey locates any and all such
items set forth as exceptions in the Title Policy as Lender may require, shall
include a legal description of the Mortgaged Real Property and the First Phase
Land, and otherwise satisfy all of Lender's survey requirements, and shall
include any other information required by Lender or the Title Insurance Company.
Lender, in its sole discretion, may elect to waive the foregoing survey delivery
requirement as a condition precedent to the making of the Mortgage Component
Advance and/or the Receivables Component Advance hereunder, in which case
Borrower agrees to deliver to Lender surveys and surveyor's certificates that
comply fully with the requirements of this Section 4.1(i) by no later than
thirty (30) days following the Closing Date.
(j) Environmental Report. An environmental report or reports
covering the Resort, including all Mortgaged Real Property, confirming (to the
extent relevant, in Lender's sole discretion):
(i) The absence of Hazardous Materials on, under, or
affecting the Land or any other real property or personal property comprising
the Resort, except for: (A) such Hazardous Materials as may be generated, used,
stored, or transported in connection with the permitted uses of the Mortgaged
Real Property and then only to the extent permitted by law after obtaining all
necessary permits and licenses therefor; and (B) those Hazardous Materials that
are described in the Settlement Agreement;
(ii) That the engineering or environmental consulting
firm has obtained, reviewed, and included within its report a CERCLIS printout
from the Environmental Protection Agency (the "EPA"), statements from the EPA
and other applicable state and local authorities, and such other information as
Lender may reasonably require, including, without limitation, a Phase I
Environmental Inspection, all of which information shall confirm that there are
no known or suspected Hazardous Materials located at, used or stored on, or
transported to or from the Resort or in such proximity thereto as to create a
material risk of contamination of any Collateral, except for: (A) such Hazardous
Materials as may be generated, used, stored, or transported in connection with
the permitted uses of the Mortgaged Real Property and then only to the extent
permitted by law after obtaining all necessary permits and licenses therefor;
and (B) those Hazardous Materials that are described in the Settlement
Agreement;
(iii) The absence of radon gas at the Resort,
including all of the Units, or, if radon gas is found to be present in any part
of the Resort or the Units, that such presence is of a nature or magnitude so as
to be fully in compliance with applicable standards under the Environmental Laws
and all other applicable laws or standards; and
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29
(iv) The absence of friable asbestos within the
Units, Common Areas, or elsewhere at the Resort or, if friable asbestos is found
to be present in any part of the Resort, that such presence is of a nature or
magnitude that is able to be removed by a licensed removal contractor for a
guaranteed maximum sum satisfactory to Lender.
(k) Evidence of Insurance. Lender has received certified
copies of all insurance policies and endorsements thereto or other evidence
satisfactory to Lender, in its sole discretion, relating to the Resort,
including but not limited to the Improvements and the Encumbered Intervals. In
addition, Lender has received written evidence that Borrower has obtained and is
maintaining or has caused the Condominium Association or the Timeshare
Association to obtain and maintain all policies of insurance required by and in
accordance with Section 6.1(c) hereof, including but not limited to copies of
the most current paid insurance premium invoices for such policies.
(1) Applicable Laws. Lender has received evidence satisfactory
to Lender that all existing and contemplated Improvements at the Resort are and
will be in compliance with all applicable zoning, building, and other Applicable
Laws in connection with the construction, development, establishment, and
operation of the Resort and the sale, use, marketing, and occupancy of Units and
Intervals thereat.
(m) Litigation. Lender has received evidence satisfactory to
Lender that there exist no pending or threatened bankruptcy, foreclosure, or
other material litigation or judgments outstanding against or with respect to
the Resort, all or any portion of the Collateral, Borrower, or any Guarantor
(each a "Material Party"). The term "other material litigation" as used herein
shall not include matters in which (i) a Material Party is a plaintiff and no
counterclaim is pending; or (ii) Lender determines, in its sole discretion, that
such litigation is immaterial due to settlement, insurance coverage, frivolity,
or amount or nature of claim. Lender shall have obtained an independent search,
at Borrower's expense, confirming that no such bankruptcy, foreclosure action,
or other material litigation or judgment exists.
(n) Code/Other Searches. Lender has obtained such searches of
the applicable public records as it deems necessary under all Applicable Laws to
verify that it has a first and prior perfected Lien and security interest
covering all of the Collateral.
(o) Taxes and Assessments. Lender has received copies of the
most current tax bills related to the Resort, including the Land, Units, and
Intervals thereat, together with evidence satisfactory to it that all taxes and
assessments owed by or for which Borrower or an Association is responsible for
collection have been paid, which taxes and assessments include, without
limitation, sales taxes, room occupancy taxes, payroll taxes, personal property
taxes, excise taxes, intangible taxes, real property taxes, income taxes, and
any assessments related to the Resort and/or the Land, Units, or Intervals
thereat. Lender shall also have received information satisfactory to Lender
disclosing the tax identification numbers, tax rates, estimated tax values,
assessment ratios, and estimated assessment values or amounts with respect to
the Resort and the Land and the identities
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30
of the taxing authorities having jurisdiction over the Land and the Resort as
well as the instrumentalities and entities having the power and jurisdiction to
impose assessments against the Land or the Resort.
(p) Financial Statements. Lender has received the Financial
Statements required by this Agreement and the other Loan Documents to be
delivered to Lender or otherwise required by Lender, for Borrower and
Guarantors, all in form and substance satisfactory to Lender.
(q) Appraisal. Unless waived by Lender, Borrower has furnished
Lender with an MAI appraisal of the Resort, including but not limited to all
real and personal property contemplated to become Mortgaged Real Property,
Encumbered Intervals, or Encumbered Personal Property hereunder, prepared by a
nationally recognized appraisal firm and in form and content acceptable to
Lender, in its sole discretion.
(r) Physical Inspection. Lender may, in its sole discretion,
at any time cause to be made its own physical inspection of the Resort. If
Lender's physical inspection indicates that any structural or mechanical defect
exists with respect to all or any portion of the Resort, Lender shall have the
right to engage an independent engineering firm to prepare a structural and
mechanical engineering report covering the Resort confirming that the Resort and
the improvements thereat are mechanically and structurally sound. The cost of
all inspections, reports, and any requisite remedial work with respect to the
mechanical and structural condition of the Resort shall be borne entirely by
Borrower.
(s) Permits and Approvals. Lender has received copies of
building permit(s) and other satisfactory evidence that the Land, the Units, and
other improvements thereto, including the Improvements, and the intended uses of
the Resort are in compliance with all Applicable Laws, including, without
limitation: (i) Environmental Laws; (ii) erosion control ordinances; (iii)
doing-business and licensing laws, including those governing alcohol and
beverages; (iv) the Americans with Disabilities Act of 1990 and any other laws
protecting disabled or handicapped persons; and (v) zoning laws. All such
permits and approvals granted to Borrower shall continue to be legally valid and
shall remain in full force and effect for so long as any Obligations remain
outstanding.
(t) Plans. Lender has received and approved complete and
detailed as-built Plans which shall be satisfactory to Lender, in its sole
discretion, including any changes or modifications thereto and including Plans
for architectural, structural, mechanical, plumbing, electrical, and site
development (including storm drainage, utility lines, erosion control, and
landscaping)work. All Plans must be stamped with all required approvals from all
applicable governmental authorities, certified under seal by the Architect, and
signed by Borrower and the applicable general contractor to be true copies of
the Plans architecturally and structurally approved by all authorities and
agencies having jurisdiction thereover. No change shall be made thereafter in
the Plans without the prior written consent of Lender.
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31
(u) Certificate of Architect. Lender has received a
Certificate of Architect from the Architect who prepared the Plans addressed to
Lender and stating that (i) that there is adequate ingress and egress to the
Resort and the Improvements thereat; (ii) that the applicable Plans have been
approved by all applicable governmental authorities, meet all state
construction, energy conservation, and Environmental Laws, and comply with all
federal laws and regulations adopted pursuant to the Fair Housing Act of 1968
(as amended), the Americans with Disabilities Act of 1990, and all other
Applicable Laws; (iii) that provisions have been made for the handicapped in
accordance with all state and local ordinances, rules, and regulations; (iv)
that the zoning is proper; (v) that all utilities necessary to service the
Improvements and the Resort are available with adequate capacity; (vi) that all
required governmental permits and approvals have been obtained; and (vii) such
additional items as may reasonably be required by Lender; provided, however,
that Lender, in its sole discretion, may elect to accept a Certificate of
Architect that fails to make each and every one (1) of the foregoing statements,
provided that Lender has received other written confirmation satisfactory to it,
in its sole discretion, that each such statement is true and accurate.
(v) Lien Waivers. Lender has received a certificate or
affidavit of Borrower certifying that within the past ninety (90) days, no work
has been performed on the Resort for which payment has not been made in full and
for which a Lien could be filed, together with such indemnity or other financial
assurances as the Title Insurance Company may require to issue affirmative
mortgagee's title insurance against mechanics' and materialmen's Liens,
including, without limitation, waivers of Lien from each and every contractor,
subcontractor, laborer, or material supplier performing services or supplying
material to the Resort within the past ninety (90) days and an affidavit listing
all of said entities and certifying that no work has been performed and no
materials have been supplied for which the costs remain unpaid prior to the
Closing Date or the date of the applicable Advance.
(w) Interval Sales. Lender has received written evidence to
the effect that Borrower has complied in all respects with all Applicable Laws
relating to the marketing and sale of Intervals, including but not limited to
any Encumbered Intervals, at or with respect to the Resort, including but not
limited to timeshare registration statutes, rules, and regulations.
(x) Resort Condominium Regime. Lender has received written
evidence satisfactory to it, in its sole discretion, that all Units in which
Borrower is selling Intervals have properly been annexed into the Resort
Condominium Regime in full compliance with all Applicable Laws.
(y) Management Contract. Lender has received a copy of the
management contract(s) for the Resort (the "Management Contract") and determined
to its satisfaction that the Resort is being managed by a professional
management company acceptable to Lender.
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32
(z) Employment Contracts. Lender has received a copy of the
employment contract for each officer of Borrower and determined to its
satisfaction that the terms thereof are commercially reasonable.
(aa) Merger. Lender has received evidence satisfactory to
Lender, in its sole discretion, that one hundred percent (100%) of the issued
and outstanding shares of capital stock of ERC Acquisition Corp.
("Acquisition"), a Delaware corporation, following Acquisition's merger with
Eastern Resorts Corporation, a Rhode Island corporation, have been validly and
irrevocably transferred to Equivest, and that Acquisition has legally changed
its name to Eastern Resorts Corporation, a Delaware corporation (i.e., one (1)
of the Guarantors).
(bb) Timeshare Construction Credit Facility; Timeshare
Receivables Hypothecation Facility. On or prior to the Closing Date, RFI has
paid Lender any and all amounts previously advanced by Lender to RFI pursuant to
the Timeshare Construction Credit Facility or the Timeshare Receivables Credit
Facility, together with accrued but unpaid interest thereon, in respect of RFI's
"Applicable Underlying Loans" (as such term is defined in the Loan and Security
Agreements that evidence the Timeshare Construction Credit Facility and the
Timeshare Receivables Credit Facility) to Borrower in connection with the
acquisition, development, and construction of the Resort and the sale of
Intervals thereat or with respect thereto.
(cc) Units/Intervals Free and Clear. Lender has received
evidence satisfactory to it, in Lender's sole discretion, that all Units and
Intervals, title to which is vested in either Association, are free and clear of
any Liens, security interests, adverse claims, and other encumbrances of any
type, except for the Permitted Liens and Encumbrances.
(dd) Miscellaneous. Such other matters as Lender shall
reasonably require.
True copies or, to the extent required hereby, originals of all of the
above-referenced documents, instruments, forms, opinions, and other materials
shall be delivered to Lender or its counsel at least five (5) days prior to the
Closing Date, unless Lender, in its sole discretion, elects to shorten such time
frame.
4.2 Funding Procedures.
(a) Mortgage Component of the Loan.
(i) Mortgage Component Advance. Subject to all of the
terms, provisions, and conditions hereof, Lender shall make the Mortgage
Component Advance to Borrower exclusively for the purposes set forth in Sections
2.1(a)(i) and (ii) above promptly following the recordation of the Resort
Mortgage, Lender's perfection of its Liens and security interests in all other
Collateral, and Borrower's complete satisfaction of all other conditions
precedent to such Mortgage Component Advance set forth herein and in the other
Loan Documents.
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33
(ii) Payments by Lender. Notwithstanding any term,
provision, or condition hereof or of any other Loan Document to the contrary,
Lender may, at any time and without a request therefor having been submitted by
Borrower, advance Loan proceeds for the purpose of paying interest on the Loan,
real estate taxes, insurance premiums, fees and expenses of Lender's counsel, or
to cure an Event of Default. After the occurrence of an Event of Default or of
an event or the existence of a condition which, with the giving of notice or the
lapse of time or both, would constitute an Event of Default hereunder, Lender
may make payments directly to any Person that has supplied labor, material, or
services in connection with or incidental to the construction of any of the
Improvements or for the payment of any other costs in connection with the Resort
or any of Borrower's undertakings pursuant to the Loan Documents.
Notwithstanding the foregoing provisions of this Section 4.2(a)(ii), and except
as otherwise provided herein to the contrary, Lender shall furnish Borrower with
written notice of Lender's intent to take any of the foregoing actions and
afford Borrower ten (10) days in which to take such actions itself prior to
Lender's doing so.
(b) Receivables Component of the Loan. Subject to all of the
terms, provisions, and conditions hereof and of the other Loan Documents, Lender
shall make the Receivables Component Advance to Borrower exclusively for the
purpose set forth in Sections 2.1(b) above promptly following the recordation of
the Resort Mortgage, Lender's perfection of its Liens and security interests in
all other Collateral, and Borrower's complete satisfaction of all other
conditions precedent to such Receivables Component Advance set forth herein and
in the other Loan Documents. In particular, Borrower shall submit to Lender a
written request for the Receivables Component Advance (the "Receivables Advance
Request") in substantially the form of Exhibit "G," attached hereto and
incorporated herein by this reference. Provided that no Event of Default
hereunder has occurred, the Receivables Component Advance shall be made within
five (5) Business Days following the last to occur of (a) Lender's receipt of
the Receivables Advance Request and all items required to be submitted to Lender
hereunder, including but not limited to those items referenced in this Section
4.2(b) (to the extent applicable); (b) Servicing Agent's written notification to
Lender that all items submitted to Servicing Agent for its review pursuant
hereto and the Servicing Agreement are acceptable (unless Lender, in its sole
discretion, elects to waive this requirement); and (c) Lender's receipt of a
written certification from Custodian that confirms that Custodian has in its
possession each of the documents, instruments, and other items required to be
delivered to Custodian pursuant to Section 3.5 hereof (unless Lender, in its
sole discretion, has elected to take possession of such documents, instruments,
and other items itself).
In particular, the obligation of Lender to make the
Receivables Component Advance shall be subject to the complete satisfaction of
the following conditions precedent:
(i) Requests for Advances. The Receivables Advance
Request shall:
(A) Be in writing;
(B) Specify the principal amount of the
Advance requested;
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34
(C) Certify the amount of the then current
Borrowing Base;
(D) Confirm that all representations and
warranties of Borrower contained in this Agreement are true and correct as of
the date of the Receivables Advance Request and, after giving effect to the
making of the requested Advance, will be true and correct as of the date on
which the Receivables Component Advance is to be made;
(E) State that no Default or Event of
Default exists as of the date of the Receivables Advance Request and, after
giving effect to the making of such Receivables Component Advance, no Default or
Event of Default would exist as of the date on which the Receivables Component
Advance is to be made;
(F) Be delivered to the office of Lender as
set forth in Section 11.1 hereof at least five (5) Business Days prior to the
date of the requested Advance, unless Lender, in its sole discretion, agrees to
shorten such time frame; provided, however, that Lender shall have no obligation
whatsoever to make the Receivables Component Advance until five (5) days
following its receipt of each and every item required to be furnished to Lender
hereunder and its confirmation of Borrower's complete satisfaction of all
conditions precedent to the making of such Receivables Component Advance.
(G) Be signed by a duly authorized officer
of Borrower;
(H) Be accompanied by Borrower's sworn
written certificate to the effect that, to the extent applicable, Borrower:
(1) Has received no notice of any
asserted or threatened defense, offset, counterclaim, discount, or allowance in
respect of each Note Receivable to be pledged to Lender through a collateral
assignment of all of Borrower's right, title, and interest therein in connection
with such Receivables Component Advance; and
(2) Has received no notice of any
asserted or threatened defense, offset, counterclaim, discount, or allowance in
respect of any Pledged Note Receivable; and
(I) Be accompanied by such additional items
as Lender shall reasonably require, including, without limitation:
(1) An aging report on the applicable
Pledged Notes Receivable; and
(2) A delinquency report showing which
Notes Receivable in connection with the Receivables Component Advance are
contractually past due and the duration of each such delinquency.
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35
Both such reports shall be in form and
substance satisfactory to Lender, in its sole discretion.
(ii) Loan Documents/Collateral. Not less than five
(5) Business Days prior to the date of the Receivables Component Advance (unless
Lender, in its sole discretion, elects to shorten such time frame), Borrower
shall have:
(A) Delivered to Lender and Servicing Agent
a list of all Eligible Notes Receivable that are intended to be the subject of
such Receivables Component Advance, indicating the unpaid principal balance
owing on each of such Pledged Notes Receivable, together with such additional
information as Lender may request;
(B) Delivered to Lender and Servicing Agent
(or, if Lender shall so instruct, a designee appointed by Lender in writing) all
documents, instruments, and other items described in Section 3.5(a) above;
(C) Delivered to Lender (or if Lender shall
so instruct, a designee appointed by Lender in writing) an original Pledge and
Assignment of Notes Receivable and Purchase Agreements in the form of Exhibit
"B" hereto, duly executed and in proper form for recording, assigning to Lender
all of Borrower's right, title, and interest in and to each Note Receivable
identified in the exhibit or schedule thereto, together with all accounts,
chattel paper, and general intangibles related thereto and the cash and noncash
proceeds thereof. Such Pledge and Assignment of Notes Receivable and Purchase
Agreements shall be recorded in the Newport Land Evidence Records, and
corresponding UCC-1 financing statements shall be recorded in the Newport Land
Evidence Records and filed with the Rhode Island Secretary of State; and
(D) Delivered to Lender original UCC-1
financing statements covering the Collateral in general, to be recorded in the
Newport Land Evidence Records and filed with the Rhode Island Secretary of
State.
All Pledged Notes Receivable collaterally assigned to Lender
must have evidence thereon of payment of all required documentary stamps and
intangible taxes, if any.
(iii) Other Conditions. In addition to the other
conditions set forth in this Agreement, the making of the Receivables Component
Advance shall be subject to the complete satisfaction of all of the following
conditions as of the date of such Advance:
(A) All of the closing conditions set forth
in the Commitment Letter, this Agreement, and the other Loan Documents have been
fully satisfied by Borrower;
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36
(B) No Default or Event of Default exists
immediately prior to the making of such requested Advance or, after giving
effect thereto, immediately after the making of such requested Advance;
(C) The date on which the Receivables
Component Advance is to be made is a Business Day;
(D) Lender has determined that each Pledged
Note Receivable as to which such Receivables Component Advance is sought is an
Eligible Note Receivable and that such Advance will not be in an amount greater
than the Borrowing Base;
(E) All representations and warranties
contained herein, in the other Loan Documents, and in any certificates delivered
to Lender in connection with the Loan are true and correct in all material
respects;
(F) Lender has received evidence
satisfactory to Lender, in its sole discretion, that all applicable Units have
been accepted by the Exchange Company into its reciprocal exchange program; and
(G) Lender has received evidence
satisfactory to Lender, in its sole discretion, that the Resort (including the
marketing and sale of Intervals thereat or with respect thereto), the
Collateral, Borrower, and Guarantors are in full compliance with all Applicable
Laws.
SECTION 5. GENERAL REPRESENTATIONS AND WARRANTIES
Borrower and Guarantors, jointly and severally, hereby represent and
warrant to Lender as follows:
5.1 Organization, Standing, Qualification. Borrower is a limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of Rhode Island and as a foreign limited liability company
under the laws of each jurisdiction in which the character or location of the
properties owned by it or the business transacted by it requires licensing and
qualification. Borrower has all requisite power to conduct its business and to
execute, deliver, and perform its obligations under the Loan Documents.
5.2 Organization, Standing, Qualification. Equivest is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Florida and as a foreign corporation under the laws of each
jurisdiction in which the character or location of the properties owned by it or
the business transacted by it requires licensing and qualification. ERC is a
corporation duly organized, validly existing, and in good standing under the law
of the State of Delaware and as a foreign corporation under the laws of each
jurisdiction in which the character or location of the
<PAGE>
37
properties owned by it or the businesses transacted by it requires licensing and
qualification. Each Guarantor has all requisite power, corporate or otherwise,
to conduct its business and to execute, deliver, and perform its obligations
under the Loan Documents.
5.3 Authorization, Enforceability, Etc.
(a) The execution, delivery and performance by Borrower and
Guarantors of the Loan Documents has been duly authorized by all necessary
corporate and other actions by Borrower and Guarantors and does not and will not
(i) violate any provision of Borrower's or any Guarantor's articles of
incorporation, bylaws, articles of organization, operating agreement, or any
other agreement, statute, rule, regulation, order, writ, judgment, injunction,
decree, determination, or award presently in effect to which Borrower or any
Guarantor is a party or is subject; (ii) result in, or require the creation or
imposition of, any Lien upon or with respect to any asset of Borrower or any
Guarantor other than Liens in favor of Lender and the Permitted Liens and
Encumbrances; or (iii) result in a breach of, or constitute a default by
Borrower or any Guarantor under, any indenture, loan, or credit agreement or any
other agreement, document, instrument, or certificate to which Borrower or any
Guarantor is a party or by which it or any of its assets are bound or affected,
including but not limited to any loan from or agreement of any type with a third
party lender.
(b) No approval, authorization, order, license, permit,
franchise, or consent of, or registration, declaration, qualification, or filing
with, any governmental authority or other Person is required in connection with
the execution, delivery, and performance by Borrower or Guarantors of any of the
Loan Documents in addition to those that have already been obtained.
(c) The Loan Documents constitute legal, valid, and binding
obligations of Borrower and Guarantors, enforceable against Borrower and
Guarantors in accordance with their respective terms.
(d) The execution and delivery of the Loan Documents, the
delivery and endorsement to Lender of the Pledged Notes Receivable, the
recordation of the Resort Mortgage in the Newport Land Evidence Records, the
filing and recordation of UCC-1 financing statements with the Rhode Island
Secretary of State and in the Newport Land Evidence Records, respectively, and
the recordation (as appropriate) of the Pledge and Assignment of Notes
Receivable and Purchase Agreements and the other Loan Documents create in favor
of Lender valid and perfected continuing first priority Liens and security
interests in and to all of the Collateral. The Collateral secures the full
payment and performance of the Obligations.
(e) To the best of Borrower's knowledge after good faith
diligent inquiry, none of the Pledged Notes Receivable is forged or has affixed
thereto any unauthorized signatures or has been entered into by any Person
without the required legal capacity.
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38
(f) There have been no material modifications or amendments
whatsoever to the Pledged Notes Receivable, other than those expressly approved
by Lender in writing, the originals of which have been delivered to Custodian.
(g) To the best of Borrower's knowledge after good faith
diligent inquiry, the makers of the Pledged Notes Receivable have no defenses,
offsets, claims, or counterclaims, relating thereto or to the related Purchase
Agreements or any other related documents or instruments.
(h) The Resort Mortgage constitutes and will continue to
constitute a valid and enforceable first and exclusive Lien and security
interest on the Mortgaged Real Property and the Encumbered Intervals.
(i) The Pledged Notes Receivable are and shall remain in full
force and effect as valid and binding obligations of the respective makers
thereof in favor of Lender, as the collateral assignee of Borrower's right,
title, and interest therein.
(j) The grant of the Liens and security interests described
herein by Borrower in favor of Lender has not adversely affected and will not
adversely affect the validity or enforceability of the obligations of the
respective makers of the Pledged Notes Receivable thereunder or pursuant to
their respective Purchase Agreements or any related documents or instruments.
(k) Lender is not and shall not be required to take, and
Borrower has taken, any and all required steps to perfect and maintain Lender's
Liens and security interests in the Collateral (other than maintaining or
causing Custodian to maintain possession, custody, and control of the portion of
the Collateral constituting instruments and timely filing continuation
statements for UCC financing statements); and Lender is not and shall not be
required to collect or realize upon the Collateral or any distribution of
interest or principal, nor shall loss of, or damage to, any Collateral release
Borrower or Guarantors from any of the Obligations.
5.4 Financial Statements and Business Condition. The Financial
Statements fairly present the respective financial conditions and results of
operations of Borrower and Guarantors as of the date or dates thereof and for
the periods covered thereby. There are no material liabilities, direct or
indirect, fixed or contingent, of Borrower or Guarantors as of the dates of such
Financial Statements that are not reflected therein or in the notes thereto that
have not otherwise been disclosed to Lender in writing. Except for any such
changes heretofore expressly disclosed in writing to Lender, there have been no
material adverse changes in the respective financial conditions of Borrower or
Guarantors from the financial conditions shown in their respective Financial
Statements, nor have Borrower or Guarantors incurred any material liabilities,
direct or indirect, fixed or contingent, that are not shown in their respective
Financial Statements. Borrower and Guarantors are able to pay all of their
respective debts as they become due, and Borrower and Guarantors, as the case
may be, will maintain such solvent financial condition, giving effect to the
Obligations, as long as Borrower or Guarantors are obligated to Lender under
this Agreement or any of the other Loan Documents.
<PAGE>
39
Neither Borrower's nor Guarantors' Obligations under this Agreement and the
other Loan Documents will render Borrower or Guarantors unable to pay their
respective debts as they become due.
5.5 Taxes. Borrower represents and warrants that (a) it has paid in
full all ad valorem taxes and other taxes and assessments levied against the
Collateral, and Borrower knows of no basis for any additional taxes or
assessments against the Resort or Collateral; and (b) it has filed all tax
returns required to have been filed by it and has paid or will pay, prior to
delinquency, all taxes shown to be due and payable on such returns, including
interest and penalties, and all other taxes that are payable by it. To the best
of Borrower's knowledge after good faith diligent inquiry, no tax audit is
pending or threatened with respect to Borrower or any Guarantor.
5.6 Title to Collateral and Other Properties; Prior Liens. Borrower has
good and marketable title to all of the Collateral, including but not limited to
all Mortgaged Real Property, Encumbered Intervals, and Pledged Notes Receivable,
together with all rights, properties, and benefits appurtenant or related
thereto. Other than those granted in favor of Lender, there are no Liens,
security interests, charges, or other encumbrances against all or any portion of
the Collateral or any Units or Intervals, title to which is vested in the
Condominium Association or the Timeshare Association, including but not limited
to Units R-201, R-202, R-203, R-204, R-205, R-206, R-207, R-208, R-209, R-210,
and R-211 of the Resort Condominium Regime's first phase, except for the
Permitted Liens and Encumbrances set forth in Exhibit "D" hereto. No financing
statement or other instrument similar in effect covering all or any portion of
the Collateral or such Units or Intervals is on file in any filing or recording
office, except such as may have been filed or recorded in favor of Lender.
5.7 Subsidiaries, Affiliates, and Capital Structure. Guarantors are
involved in the business operations of and derive substantial financial benefit
from Borrower, and all parties hereto will derive substantial financial benefit
from the Loan. Equivest owns and shall continue to own one hundred percent
(100%) of the authorized, issued, and outstanding shares of common stock of ERC,
and ERC is and shall remain the sole member of Borrower. For so long as Borrower
is obligated to Lender under any of the Loan Documents, there shall be no change
of ownership of Borrower or any Guarantor, other than the reasonable and
customary trading of the stock of Equivest on the public market. None of the
Affiliates of Borrower or any Guarantor are parties to any proxies, voting
trusts, shareholder agreements, or similar arrangements, pursuant to which
voting authority, rights, or discretion with respect to Borrower or any
Guarantor is vested in any other Person, except for that certain Stockholders'
Agreement dated July 16, 1998, by and among Equivest, R. Perry Harris, and Karen
Harris, that certain Warrant to Purchase Common Stock of Equivest Finance, Inc.
dated July 17, 1998, in favor of Lender, and that certain Registration Rights
Agreement dated July 17, 1998, by and between Equivest and Lender.
5.8 Litigation, Proceedings, Etc. There are no actions, suits,
proceedings, orders, or injunctions pending or, to the best of Borrower's
knowledge after good faith diligent inquiry, threatened against or affecting
Borrower, any Guarantor, their respective Affiliates, or the Resort,
<PAGE>
40
at law or in equity, or before or by any governmental authority or other
tribunal, that (a) could have a material adverse effect on Borrower, Guarantors,
any Affiliate of Borrower or Guarantors, or the Resort that have not been fully
disclosed to Lender in writing prior to the Closing Date; or (b) could have a
material adverse effect on all or any portion of the Collateral. Exhibit "H,"
attached hereto and incorporated herein by this reference, describes all
currently pending litigation against Borrower, Guarantors, or any Affiliate
thereof.
5.9 Licenses, Permits, Etc. Borrower, the Resort, the Associations, and
all other Persons involved in the management or operation of the Resort possess
and will at all times continue to possess all requisite franchises, certificates
of convenience and necessity, operating rights, approvals, licenses, permits,
consents, authorizations, exemptions, and orders as are reasonably necessary or
appropriate to carry on its or their business as it is now being conducted,
without any known conflict with the rights of others and, with respect to
Borrower and the Collateral, in each case subject to no mortgage, pledge, Lien,
lease, encumbrance, charge, security interest, title retention agreement, or
option other than the Permitted Liens and Encumbrances. All such franchises,
certificates of convenience and necessity, operating rights, approvals,
licenses, permits, consents, authorizations, exemptions, and orders are
presently in full force and effect, and there is no action currently pending or
threatened effort to revoke or modify any of them.
5.10 Environmental Matters. The Resort contains no Hazardous Materials,
and no Hazardous Materials are used or stored at or transported to or from the
Resort, except for: (a) such Hazardous Materials as may be generated, used,
stored, or transported in connection with the permitted uses of the Mortgaged
Real Property and then only to the extent permitted by law after obtaining all
necessary permits and licenses therefor; and (b) those Hazardous Materials that
are described in the Settlement Agreement. Furthermore, neither Borrower nor any
representative thereof has received notice from any governmental agency or other
Person with regard to Hazardous Materials on, under, or affecting all or any
portion of the Collateral, and neither Borrower, the Associations, the Resort,
any managers thereof, nor any Collateral are in violation of any Environmental
Laws.
5.11 Full Disclosure. NO INFORMATION, EXHIBIT, OR WRITTEN REPORT OR THE
CONTENT OF ANY SCHEDULE FURNISHED BY OR ON BEHALF OF BORROWER OR GUARANTORS TO
LENDER IN CONNECTION WITH THE LOAN, THE RESORT, OR THE COLLATERAL, AND NO
REPRESENTATION OR STATEMENT MADE BY BORROWER OR GUARANTORS IN ANY LOAN DOCUMENT,
CONTAINS ANY MATERIAL MISSTATEMENT OF FACT OR OMITS THE STATEMENT OF A MATERIAL
FACT NECESSARY TO MAKE THE STATEMENT CONTAINED HEREIN OR THEREIN NOT MISLEADING.
NEITHER BORROWER NOR GUARANTORS KNOW OF ANY FACT OR CONDITION THAT COULD
ADVERSELY AFFECT THE OPERATION OF THE RESORT IN ACCORDANCE WITH ALL APPLICABLE
LAWS OR IMPEDE OR PRECLUDE BORROWER'S
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41
OR GUARANTORS' PERFORMANCE OF THEIR RESPECTIVE OBLIGATIONS PURSUANT
TO THE LOAN DOCUMENTS.
Borrower's Initials: ____
Guarantors' Initials: ______
5.12 Use of Proceeds/Margin Stock. None of the proceeds of the Loan
will be used to purchase or carry any "margin stock" (as defined under
Regulation U of the Board of Governors of the Federal Reserve System, as in
effect from time to time), and no portion of the proceeds of the Loan will be
extended to others for the purpose of purchasing or carrying margin stock. None
of the transactions contemplated in this Agreement (including, without
limitation, the use of the proceeds from the Loan) will violate or result in the
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Part 11. The proceeds of the Loan will be disbursed only for
the purposes set forth in Section 2.1 hereof.
5.13 No Defaults. No Default or Event of Default exists, and there is
no breach or violation in any material respect of any term of any document,
contract, agreement, charter instrument, bylaws, or other instrument to which
Borrower, Guarantors, or any Affiliate thereof is a party or by which it may be
bound.
5.14 Restrictions on Borrower and Guarantors. Neither Borrower, any
Guarantor, nor any Affiliate thereof is a party to any contract or agreement, or
subject to any Lien, charge, or restriction, that materially and adversely
affects its business. Neither Borrower nor any Guarantor will be, on or after
the Closing Date, a party to any contract or agreement that restricts its right
or ability to incur indebtedness or prohibits Borrowers or any Guarantor's
execution and delivery of, or compliance with the terms of, this Agreement or
the other Loan Documents, other than the documents and instruments that evidence
or secure the Bridge Loan Credit Facility. Borrower has not agreed or consented
to cause or permit in the future (upon the happening of any contingency or
otherwise) any of the Collateral, whether now owned or hereafter acquired, to be
subject to a Lien except in favor of Lender as provided hereunder and the
Permitted Liens and Encumbrances.
5.15 Broker's Fee. Lender and Borrower represent to each other that
neither of them has made any commitment or taken any action that could result in
a claim for any broker's, finder's, or other similar fees or commissions with
respect to any of the transactions contemplated by this Agreement. Borrower
agrees to indemnify Lender and save and hold Lender harmless from and against
all claims of any Person for any broker's or finder's fee, commission, or
similar amount, unless such claim arises as the result of any commitment or
action of Lender, and this indemnity shall include reasonable attorneys' fees
and legal expenses.
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42
5.16 Tax Identification/Social Security Numbers. Borrower's and
Guarantors' respective federal taxpayer identification numbers are as follows:
Borrower: 05-04800542
Equivest: 59-2346270
ERC: Not yet obtained as of the Closing Date
5.17 Legal Compliance. Borrower has, in all material respects, complied
fully with all Applicable Laws in connection with the Resort and the Collateral,
including but not limited to (i) the Interstate Land Sales Full Disclosure Act;
(ii) any applicable condominium and timeshare statutes, rules, and regulations,
including but not limited to those governing the administration and operation of
the Associations and those requiring registration of the Intervals as a legal
prerequisite to the marketing and sale thereof, including, without limitation,
the Rhode Island Condominium Act, Title 34, Chapter 36.1 of the General Laws of
the State of Rhode Island, and the Rhode Island Real Estate Time-share Act,
Title 34, Chapter 41 of the General Laws of the State of Rhode Island; (iii)
Regulation Z of the Federal Reserve Board; (iv) the Equal Credit Opportunity
Act; (v) Regulation B of the Federal Reserve Board; (vi) Section 5 of the
Federal Trade Commission Act; (vii) all applicable state and federal securities
laws; (viii) all applicable usury laws; (ix) all applicable trade practices,
home and telephone solutions sweep-stakes, lottery, and other consumer credit
and protection laws; (x) all applicable real estate sales licensing, disclosure,
reporting, and escrow laws; (xi) the Americans with Disabilities Act of 1990 and
all other accessibility requirements; (xii) the federal postal laws; (xiii) the
Real Estate Settlement Procedures Act; (xiv) the Fair Housing Act of 1968; and
(xv) all amendments to and rules and regulations promulgated under the
foregoing. Furthermore, to the best of Borrower's knowledge after good faith
diligent inquiry the Resort and the improvements (including the Improvements)
thereat have been constructed and are and will continue to be operated in
compliance with all applicable zoning requirements, building codes, subdivision
ordinances, licensing requirements, all covenants, conditions, and restrictions
of record, and all other Applicable Laws. Borrower is not aware of any reasons
(other than the completion of all requisite applications therefor in the
ordinary course of business) why it cannot obtain all necessary permits,
licenses, certificates, franchises, consents, exemptions, orders, and approvals
to develop and operate the Resort and construct the Improvements thereat. Before
Borrower markets, offers for sale, or sells Intervals in any jurisdiction other
than the State of Rhode Island, Borrower will promptly so notify Lender and
provide Lender with evidence satisfactory to Lender that Borrower has fully
complied with all laws of such jurisdiction governing its proposed conduct
therein.
5.18 Deferred Compensation Plans. Borrower has no pension, profit
sharing, or other compensatory or similar plan (herein called a "Plan")
providing for a program of deferred compensation for any employee or officer. No
fact or situation, including but not limited to any "Reportable Event," as that
term is defined in Section 4043 of the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time (the "Pension Reform
Act"),
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43
exists or will exist in connection with any Plan of Borrower that might
constitute grounds for termination of any Plan by the Pension Benefit Guaranty
Corporation or cause the appointment by the appropriate United States District
Court of a Trustee to administer any such Plan. No "Prohibited Transaction"
within the meaning of Section 406 of the Pension Reform Act exists or will exist
upon the execution and delivery of this Agreement or the performance by the
parties hereto of their respective duties and obligations hereunder. Borrower
will (a) at all times make prompt payment of contributions required to meet the
minimum funding standards set forth in Sections 302 through 305 of the Pension
Reform Act with respect to each of their Plans; (b) promptly, after the filing
thereof, furnish to Lender copies of each annual report required to be filed
pursuant to Section 103 of the Pension Reform Act in connection with each Plan
for each Plan Year, including any certified financial statements or actuarial
statements required pursuant to said Section 103; (c) notify Lender immediately
of any fact, including but not limited to any Reportable Event arising in
connection with any Plan that might constitute grounds for the termination
thereof by the Pension Benefit Guaranty Corporation or for the appointment by
the appropriate United States District Court of a Trustee to administer the
Plan; and (d) notify Lender of any "Prohibited Transaction," as that term is
defined in Section 406 of the Pension Reform Act. Borrower will not (a) engage
in any Prohibited Transaction; or (b) terminate any such Plan in a manner that
could result in the imposition of a Lien on any asset of Borrower, pursuant to
Section 4068 of the Pension Reform Act.
5.19 Labor Relations. Borrower's employees are not parties to any
collective bargaining agreement with Borrower and, to the best of Borrower's
knowledge, there are no material grievances, disputes, or controversies with any
union or any other organization of Borrower's employees, or threats of strikes,
work stoppages, or any asserted pending demands for collective bargaining by any
union or organization.
5.20 Resort.
(a) Timeshare Plan. The Resort, which is located at 5
Washington Street, Newport, Rhode Island 02840, has been established and
dedicated and is and will remain a timeshare plan and project in full compliance
with all Applicable Laws. All Land, Units, all other Improvements thereon, the
Common Areas, the Common Furnishings, and all related real and personal property
have been and will continue to be duly submitted to the provisions of the
Declarations, as appropriate. Borrower has already paid a partial release fee to
RFI with respect to those Units listed in Exhibit "F" hereto. Borrower will not
vote to amend and will ensure that the other members of the Associations do not
vote to terminate or amend either Declaration in any material respect without
the prior written approval of Lender.
(b) Access. The Resort and all Units and Common Areas thereat
have direct access to publicly dedicated roads, and all roadways inside the
Resort have been completed and are subject to an access and use easement or
other dedication or provision that benefits and will continue to benefit all
Purchasers. All curb cuts and traffic signals shown on the Plans are existing or
have been fully approved by all necessary governmental authorities.
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44
(c) Utilities. Electricity, gas, sanitary and stormwater
sewer, telephone, water, and other reasonably necessary utilities are available,
and there is sufficient capacity to service the Resort and all Units, Common
Areas, and Common Furnishings thereat. Any easements necessary to the furnishing
of such utility services have been obtained, duly recorded, and inure to the
benefit of the Associations and all Purchasers.
(d) Amenities. Each Purchaser of an Interval has and will
continue to have access to and the full use and enjoyment of all of the Common
Areas, Common Furnishings, and public utilities of the Resort, all in accordance
with the Declarations and the other Timeshare Documents.
(e) Assessments. Each Purchaser is automatically a member of
the Condominium Association and the Timeshare Association, each of which is a
Rhode Island non-profit corporation that has the authority to levy annual
assessments to cover the costs of maintaining and operating the Resort. Each
Association is solvent, and currently levied assessments upon Purchasers will be
adequate to cover the costs of maintaining and operating the Resort and to
establish and maintain reasonable reserves for deferred maintenance and capital
improvements. Borrower is current with respect to the payment of all assessments
and other amounts owed to the Condominium Association and the Timeshare
Association in connection with any Units and Intervals of which Borrower is
deemed the owner. There are no events which currently exist or could reasonably
be foreseen by Borrower that could give rise to a material increase in such
costs. Borrower will use its best efforts to cause the Condominium Association
and the Timeshare Association to maintain the reserves described above. Any Lien
in favor of the Condominium Association or the Timeshare Association for
delinquent assessments or other amounts due with respect to any Unit or Interval
will be subordinate and subject to the Lien of the Resort Mortgage.
5.21 Timeshare Documents and Reports. Borrower has furnished Lender
with true and correct copies of all Timeshare Documents, the form and content of
which have been approved by all applicable governmental authorities, to the
extent required.
5.22 Operating Contracts. Borrower has furnished Lender with true and
correct copies of all contracts, agreements, and arrangements relating to the
operation of the Resort to which Borrower is a party or holds any interest in
and that in any way relate to the use, occupancy, maintenance, or enjoyment of
the Units or the Intervals thereat (the "Operating Contracts"). All of the
Operating Contracts are and shall, absent Lender's prior written consent, remain
unmodified, free and clear of any Lien except a Lien in favor of Lender, as
assignee of Borrower's interest therein, and in full force and effect.
5.23 Reliance by Lender. All representations, warranties, covenants,
and agreements made herein or in any certificate or other document delivered to
Lender by or on behalf of Borrower, pursuant to or in connection with this
Agreement, shall be deemed to have been relied upon by Lender, notwithstanding
any investigation heretofore or hereafter conducted by or on behalf of Lender,
and shall survive the making of the Advances and payments contemplated hereby.
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45
SECTION 6. COVENANTS
6.1 Affirmative Covenants. For so long as any of Borrower's Obligations
remain unsatisfied, Borrower hereby covenants and agrees with Lender as follows:
(a) Payment and Performance of Obligations. Borrower shall
repay all of the Loan and all related amounts when and as the same become due
and payable, and Borrower shall strictly observe and perform all of the
Obligations, including, without limitation, all covenants, agreements, terms,
conditions, and limitations contained in the Loan Documents, and will do all
things necessary that are not prohibited by law to prevent the occurrence of any
Default or Event of Default hereunder; and Borrower will maintain an office or
agency in the State of Rhode Island where notices, presentations, and demands in
respect of the Loan Documents may be made upon Borrower.
(b) Maintenance of Existence, Qualification and Assets.
Borrower shall at all times (i) maintain its legal existence; (ii) maintain its
qualification, where required, to transact business and good standing in the
State of Rhode Island and in any other jurisdiction in which it conducts
business; and (iii) comply or cause its compliance with all Applicable Laws.
(c) Maintenance of Insurance. Borrower shall ensure that
policies of insurance with premiums therefor being paid when due, are maintained
and shall deliver to Lender originals of insurance policies (together with paid
premium invoices in respect thereof) issued by such insurance companies, in such
amounts, in such form, in such substance, and with such expiration dates, as are
acceptable to Lender, in its sole discretion, and containing waivers of
subrogation rights by the insuring company, noncontributory standard mortgagee
benefit clauses or their equivalents, and mortgagee loss payable endorsements in
favor of and satisfactory to Lender and breach of warranty coverage, providing
the following types of insurance on and with respect to Borrower and the Resort:
(i) As to all Improvements that have already been
completed as of the date hereof, "All Risk Special Form" insurance coverage
(including fire, lightning, hurricane, tornado, wind and water damage,
earthquake, vandalism, and malicious mischief coverage) covering all real and
personal property that comprises the Resort, in an amount not less than the full
replacement value of such improvements and personal property, and said policy of
insurance shall provide for a deductible acceptable to Lender, breach of
warranty coverage, and replacement cost endorsements satisfactory to Lender, and
shall not permit coinsurance. All insurance shall specifically cover
architectural and engineering fees necessary to repair or replace any insured
portion of the Resort and shall cover debris removal;
(ii) Public liability and property damage insurance
covering the Resort (including coverage for liquor-related liability) in amounts
and on terms satisfactory to Lender, in its sole discretion; and
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46
(iii) Such other insurance on the Resort or any
replacements or substitutions therefor, including, without limitation, rent
loss, business interruption, flood insurance (if the Resort is or becomes
located in an area that is considered a flood risk by the U.S. Emergency
Management Agency or pursuant to the National Flood Insurance program), in such
amounts and upon such terms as may from time to time reasonably be required by
Lender.
Lender shall expressly be named an insured and loss payee in
each insurance policy described in this Section 6.1(c). To the extent that any
"institutional mortgagee," "institutional lender," "mortgagee," or "secured
party" (as defined or used in either of the Declarations) other than Lender has
any rights to approve the form of insurance policies with respect to the Resort,
the amounts of coverage thereunder, the insurers under such policies, or the
designation of an attorney-in-fact for purposes of dealing with damage to any
part of the Resort or insurance claims or matters related thereto or any
successor to such attorney-in-fact or any changes with respect to any of the
foregoing, Borrower shall take all steps as may be necessary or appropriate, in
Lender's sole discretion, to ensure that Lender shall at all times have a
co-equal right with such other "institutional mortgagee," "institutional
lender," or other "mortgagee" (including, without limitation, Borrower or any
third-party lender), to approve all such matters and any proposed changes in
respect thereof; and Borrower shall not cause and shall use its best efforts to
prohibit any changes with respect to any insurance policies, insurers, coverage,
attorney-in-fact or insurance trustee, if any, without Lender's prior written
approval.
In the event of any insured loss or claim in respect of all or
any portion of the Resort, Borrower shall cause all proceeds of such insurance
policies to be applied in a manner consistent with the Timeshare Documents and
all Applicable Laws.
All insurance policies required pursuant to this Agreement (or
the Timeshare Documents) shall provide that the coverage afforded thereby shall
not expire or be amended, canceled, modified, or terminated without at least
thirty (30) days' prior written notice to Lender and contain a provision
affirming Lender's rights and benefits thereunder, despite any violation of the
applicable policy terms by Borrower or other Person. At least thirty (30) days
prior to the expiration date of each policy maintained pursuant to this Section
6.1(c), a certified copy of a renewal or replacement thereof satisfactory to
Lender shall be delivered to Lender, along with evidence satisfactory to Lender
that the premium therefor has been paid in full. The delivery of any insurance
policies hereunder shall constitute an assignment of all unearned premiums as
further security for the Obligations. In the event that all required premium
payments for all such insurance policies are not paid at least thirty (30) days
prior to the expiration date of each policy maintained pursuant to this Section
6.1(c), Borrower shall, immediately upon receiving notice thereof, notify Lender
in writing of such failure to timely pay the required insurance premiums.
Borrower shall make a good faith inquiry on a regular basis to each Association
to determine whether all insurance premiums for which it is responsible with
respect to insurance on all or any portion of the Collateral have been timely
paid. If Borrower determines upon such inquiry or otherwise that any required
insurance premiums have not been paid, Borrower shall immediately notify Lender
of such failure to timely pay the required
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47
insurance premium, and Borrower shall have thirty (30) days from receipt of a
written request from Lender to cause the required insurance premiums to be paid.
If the required insurance premiums are not paid within such thirty (30) day
period, Lender may, in its sole discretion, without any obligation to do so,
choose to pay such required insurance premiums, in which case Borrower shall pay
Lender interest at the Default Rate on any amounts so advanced. Lender may also,
in its sole discretion, in the event any required insurance premiums are not
paid when due, establish an insurance escrow account from which Lender may make
insurance payments when insurance premiums shall become due. If any required
insurance premiums are not paid as required and Lender elects not to pay such
insurance premiums or establish an escrow account for payment thereof, such
failure shall constitute an Event of Default hereunder.
In the event of any fire or other casualty to or with respect
to all or any portion of the Resort, Borrower covenants that it shall use its
good faith best efforts to cause the prompt restoration, repair, or replacement
of the damaged portion(s) or the Resort and the repair or replacement of any
other personal property to the same condition as immediately prior to such fire
or other casualty and, with respect to the real and personal property comprising
the Resort, in accordance with the terms of the Timeshare Documents and all
Applicable Laws. The insufficiency of any net insurance proceeds shall in no way
relieve Borrower from its obligations as set forth herein. In Lender's sole
discretion, any and all insurance proceeds payable to or received by Lender
pursuant to the Declarations or the applicable insurance policies may be applied
to the payment of the Obligations, whether or not due and in whatever order
Lender elects, consistent with the terms of the applicable insurance policy and
the Declarations.
Borrower shall in good faith cooperate with Lender in
obtaining for Lender the benefits of any insurance or other proceeds lawfully or
equitably payable to Borrower or any Guarantor in connection with the
transactions contemplated hereby and in paying any Obligation (including the
payment to Borrower of the expense of an independent appraisal on behalf of
Lender in case of a fire or other casualty affecting the Resort).
(d) Maintenance of Collateral. Borrower shall execute and
deliver (or cause to be executed and delivered) to Lender all security
agreements, financing statements, assignments, and such other agreements,
documents, instruments, and certificates, and all supplements and amendments
thereto, and take all such other actions, as Lender deems necessary or
appropriate in order to maintain as valid, enforceable, and perfected first
priority Liens and security interests, all Liens and security interests in the
Collateral granted to Lender to secure the Obligations. Borrower shall not grant
extensions of time for the payment of, or compromise for less than the full face
value or release in whole or in part, any Purchaser or other Person liable for
the payment of, or allow any credit whatsoever except for the amount of cash to
be paid upon, any Pledged Note Receivable, or any other instrument, chattel
paper, or document that constitutes the Collateral.
(e) Payment of Taxes and Claims. Borrower agrees to pay or
cause to be paid, when due, all taxes, charges, and assessments of any kind
imposed on or with respect to the Loan or
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48
any of the Loan Documents, the Resort, the Units, the Intervals, or any other
Collateral, including but not limited to the Mortgaged Real Property and the
Encumbered Intervals, together with any revenue, income, or profits derived
therefrom. To the extent that any such taxes, charges, or assessments are
payable by an Association, Borrower shall make good faith inquiry on a regular
basis to determine whether all such taxes, charges, and assessments have been
paid. Borrower shall immediately notify Lender in writing of any failure to
timely pay any such taxes, charges, or assessments. In the event that Lender
determines (through notice from Borrower or otherwise) that any such taxes,
charges, or assessments have not been paid when due, Borrower shall have thirty
(30) days from receipt of a written request for payment from Lender to cause the
required taxes, charges, or assessments to be paid. If such required taxes,
charges, and assessments (and any applicable late charges and interest) are not
paid within such thirty (30) day period, Lender may, in its sole discretion,
without any obligation to do so, choose to pay such taxes, charges, or
assessments on behalf of Borrower or the applicable Association, in which case
Borrower shall pay Lender interest at the Default Rate on any amounts so
advanced. In the event Lender elects not to pay the required taxes, charges, or
assessments and the same are not paid as set forth above, such failure shall
constitute an Event of Default hereunder. Borrower shall pay, where applicable,
or shall use its best efforts to cause the Condominiums Association and/or the
Timeshare Association, as appropriate, to pay on a timely basis all other
charges and assessments levied against Borrower, the Condominium Association,
the Timeshare Association, the Resort, any Unit, any Interval, or any other
Collateral, including but not limited to the Mortgaged Real Property and the
Encumbered Intervals, together with any revenue, income, or profits derived
therefrom (including, without limitation, claims for labor, services, materials,
or supplies). Except for the Liens in favor of Lender granted pursuant to the
Loan Documents, and except as otherwise specifically provided for herein,
Borrower covenants and agrees that in the event that any statutory or other Lien
(including, without limitation, any mechanics', materialmen's, judgment, or tax
liens) attaches to any of the Collateral (except for the Permitted Liens and
Encumbrances), Borrower shall, within thirty (30) days after any such Lien
attaches, either (i) cause such Lien to be released of record; or (ii) provide
Lender with a bond in accordance with the applicable laws of the State of Rhode
Island issued by a corporate surety acceptable to Lender, in its sole
discretion, in an amount and form acceptable to Lender.
(f) Inspections. Borrower shall, at any time and from time to
time, upon reasonable notice and at the expense of Borrower, including but not
limited to the travel expenses of Lender's agents, permit Lender and its agents
and representatives to inspect the Resort, any Collateral, or any of Borrowers
or Guarantors' assets, including but not limited to all documents, bank
statements, and other records within Borrower's possession, custody, or control,
and to examine and make copies and abstracts thereof, and to discuss its
affairs, finances, and accounts with any of their officers, employees,
Affiliates, contractors, or independent certified public accountants (and by
this provision, Borrower authorizes said accountants to discuss with Lender, its
agents or representatives, the affairs, finances, and accounts of Borrower).
Lender agrees to use reasonable efforts not to interfere unreasonably with
Borrower's business operations in connection with any such inspections. Without
limiting the foregoing, Lender shall have the right to make such credit
investigations as Lender may deem appropriate, in its sole discretion, in
connection with its review of any Notes
<PAGE>
49
Receivable. Borrower shall make available to Lender all such credit and other
information in Borrower's custody, possession, or control or to which Borrower
may have access with respect to any Purchasers or other obligors with respect to
any Notes Receivable as Lender may request.
(g) Reporting Requirement. For so long as any of the
Obligations remain unsatisfied, Borrower shall furnish (or cause to be
furnished, as the case may be) to Lender, in each case certified in writing by
Borrower and Guarantors as true and correct, the following items in
substantially the forms contained in Exhibit "I," attached hereto and
incorporated herein by this reference, as appropriate:
(i) Monthly Financial Reports. As soon as available
and in any event within ten (10) days after the end of each calendar month: (i)
a report showing the trial balance of the Pledged Notes Receivable; (ii) a
current aging report on the Pledged Notes Receivable; (iii) a report detailing
all amounts of every possible description received by or on behalf of Borrower
with respect to each Pledged Note Receivable during the preceding calendar month
and how such amounts were allocated between principal, interest, and other
categories; (iv) a delinquency report on all Pledged Notes Receivable; (v) a
Borrowing Base report substantially in the form contained in Exhibit "I,"
attached hereto and incorporated herein by this reference; (vi) monthly reports
from Lockbox Agent as required pursuant to the Lockbox Agreement; (vii) monthly
reports from Servicing Agent as required pursuant to the Servicing Agreement;
and (viii) such other monthly reports and other information as shall reasonably
be requested by Lender;
(ii) Quarterly Financial Reports. As soon as
available and in any event within forty-five (45) days following the end of each
calendar quarter, unaudited statements of income and expense of Borrower, each
Guarantor, and each Association for the quarterly period in question and balance
sheets of Borrower and each Guarantor as of the last day of such calendar
quarter, all in such detail and scope as may be reasonably required by Lender,
prepared in accordance with GAAP and on a basis consistent with prior accounting
periods and certified as true and correct by Borrower's, Guarantors', and each
Association's respective chief financial officers, as appropriate;
(iii) Annual Audited Financial Reports. As soon as
available and in any event within one hundred twenty (120) days after the end of
each of calendar year or other fiscal year as may be applicable with respect to
Borrower, each Guarantor, and each Association (a "Fiscal Year"), statements of
income and expense of each such entity for the annual period ended as of the end
of such Fiscal Year, and balance sheets of each such entity as of the end of
such Fiscal Year, all in such detail and scope as may be reasonably required by
Lender and prepared and audited by an independent certified public accounting
firm acceptable to Lender in accordance with GAAP and on a basis consistent with
prior accounting periods. The annual financial statements of Borrower, each
Guarantor, and each Association shall be certified by the chief financial
officer of Borrower, each Guarantor, and each Association to be true, correct,
and complete, and shall otherwise be in form acceptable to Lender;
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50
(iv) Officer's Certificate. Each set of annual
Financial Statements or reports delivered to the Lender pursuant to Sections
6.1(g)(i), (ii), and (iii) hereof shall be accompanied by a certificate of the
President or the Treasurer of Borrower or the applicable Guarantor, as
appropriate, setting forth that the signers have reviewed the relevant terms of
this Agreement (and all other agreements and exhibits between the relevant
parties), have made, or caused to be made, under their supervision, a review of
the transactions and conditions of Borrower or the applicable Guarantor from the
beginning of the period covered by the Financial Statements or reports being
delivered therewith to the date of the certificate, and that such review has not
disclosed the existence during such period of any condition or event that
constitutes a Default or Event of Default or, if any such condition or event
existed or exists or will exist, specifying the nature and period of existence
thereof and what action Borrower or the applicable Guarantor has taken or
proposes to take with respect thereto;
(v) Sales Reports. Within ten (10) days after the end
of each calendar month and within thirty (30) days after the end of each Fiscal
Year, Borrower shall deliver to Lender a sales report detailing the sales of all
Intervals at or with respect to the Resort for the period covered thereby,
together with all Interval sales made by Borrower that have been canceled during
such period. Such reports shall also indicate the number of Units and Intervals
that remain encumbered by the Resort Mortgage and the number of Units and
Intervals for which partial releases from such Resort Mortgage, if any, have
been recorded during such period and during the term of the Loan. Such reports
shall be certified by Borrower to be true, correct, and complete and otherwise
be in a form approved by Lender;
(vi) Audit Reports. Promptly upon receipt thereof,
two (2) copies of each other report submitted to Borrower, or any Guarantor by
independent public accountants or other Persons in connection with any annual,
interim, or special audit made by them of the books of Borrower or any
Guarantor;
(vii) Notice of Default or Event of Default. Promptly
upon becoming aware of the existence of any condition or event that constitutes
a Default or an Event of Default hereunder or pursuant to any of the other Loan
Documents, a written notice specifying the nature and period of existence
thereof and what action Borrower is taking or proposes to take with respect
thereto;
(viii) Notice of Claimed Default. Promptly upon
becoming aware that the holder of any material obligation or of any evidence of
material indebtedness of Borrower or any Guarantor has given notice or taken any
other action with respect to a claimed default or event of default with respect
thereto, a written notice specifying the notice given or action taken by such
holder and the nature of the claimed default or event of default and what action
Borrower or the applicable Guarantor is taking or proposes to take with respect
thereto;
(ix) Hazardous Materials. Borrower shall promptly
notify Lender of any change in the nature or extent of any Hazardous Materials
maintained on or under any of the Land
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51
or used in connection therewith, and will deliver to Lender copies of any
citation, order, notice, or other governmental or other communication received
with respect to any Hazardous Materials or other environmentally regulated
substances affecting the Resort. Lender shall have the right to require Borrower
to perform on a periodic basis (at Borrower's expense) an environmental audit of
the Resort and, if deemed reasonably necessary by Lender, an environmental risk
assessment, each of which must be satisfactory to Lender, in its sole
discretion. Each such audit and/or risk assessment shall be conducted by a
licensed environmental consultant;
(x) Material Adverse Developments. Promptly upon
becoming aware of any pending or threatened claim, action, proceeding,
litigation, development, or any other information, whether of the type
referenced in Section 5.8 hereof or otherwise, that could materially and
adversely affect Borrower, any Guarantor, the Resort, or all or any portion of
the Collateral, including but not limited to the ability of Borrower to perform
its Obligations hereunder, Borrower shall provide Lender with telephonic notice
thereof, immediately followed by telecopied and mailed written confirmation,
specifying the nature of such development or information and the anticipated
effect thereof; and
(xi) Other Information. Borrower shall promptly
deliver to Lender any other available information related to the Loan, the
Collateral, Borrower, Guarantors, or the Resort as Lender may in good faith
request.
(h) Records. Borrower shall keep and shall use its best
efforts to cause the Condominium Association and the Timeshare Association to
keep detailed accurate books and records of account in accordance with GAAP and
all Applicable Laws reflecting all financial transactions of Borrower and such
Association with respect to the Resort, including but not limited to the
marketing and sale of Intervals thereat and with respect thereto and the rental
of Units on a transient basis to members of the general public.
(i) Corporate Structure. Absent the prior written consent of
Lender, which may be granted or withheld in Lender's sole and absolute
discretion, ERC shall remain the owner and holder of one hundred percent (100%)
of the membership interests in Borrower, and Equivest shall remain the owner and
holder of one hundred percent (100%) of the authorized, issued, and outstanding
shares of stock of ERC and RFI. Borrower shall not enter into any proxies,
voting trusts, shareholder agreements, or similar arrangements for the purpose
of vesting voting rights, authority, or discretion in any other Person.
(j) Notices. Borrower shall notify Lender within five (5)
Business Days of the occurrence of any event (i) as a result of which any
representation or warranty of Borrower contained in any Loan Document would be
incorrect or materially misleading if made at that time; (ii) as a result of
which Borrower is not in full compliance with all of its covenants and
agreements contained in this Agreement or any other Loan Document; or (iii)
which constitutes or, with the passage of time, notice, or a determination by
Lender would constitute, a Default or an Event of Default.
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52
(k) Maintenance. Borrower shall use its best efforts to
maintain and cause the Condominium Association and the Timeshare Association, as
appropriate, to maintain the Resort in good repair, working order, and condition
and to make all necessary replacements and improvements to the Resort so that
the value and operating efficiency of the Resort will be maintained at all times
and so that the Resort remains in full compliance with all Applicable Laws.
(l) Claims. Borrower shall promptly notify Lender of any
claim, action, or proceeding affecting the Resort or all or any portion of the
Collateral, or any of the Liens, security interests, or rights granted in favor
of Lender hereunder or pursuant to any of the other Loan Documents. At the
request of Lender, Borrower shall appear in and defend in favor of Lender, at
Borrower's sole expense, with regard to any such claim, action, or proceeding
which might adversely affect the value of all or any portion of the Collateral
or any rights and remedies of Lender under this Agreement or pursuant to any of
the other Loan Documents.
(m) Registration and Regulations.
(i) Local Legal Compliance. Borrower will comply and
cause the Resort to comply fully with all applicable servitudes, restrictive
covenants, and Applicable Laws, including but not limited to those specified in
Section 5.17 hereof. All inspections, licenses, approvals, and permits required
to be made or issued in respect of all or any portion of the Resort have been
made or issued by the appropriate governmental authorities, and the use and
occupancy of the Resort, including but not limited to the Units and the Common
Areas, for their intended purposes is lawful under all Applicable Laws. Final
certificates of occupancy or their legal equivalent have been issued and are
currently in effect for all Units and other improvements at the Resort. The use
and occupancy of the Resort's Units on a timeshared basis will not violate or
constitute a non-conforming use under any private covenant or restriction or any
zoning, land use, or similar statute, ordinance, rule, or regulation; and
(ii) Registration Compliance. Borrower shall at all
times maintain or cause to be maintained all necessary registrations, filings,
consents, franchises, approvals, and exemption certificates, and Borrower will
make or pay, or cause to be made or paid, all registrations, declarations, or
fees with all applicable regulatory authorities and any other governmental
agencies or departments thereof, whether in the State of Rhode Island or any
other jurisdiction, required in connection with the marketing and sale of
Intervals at or with respect to the Resort and the occupancy, use, and operation
thereof, and the incorporation of Units into the timeshare plan established
pursuant to the Declarations and the other Timeshare Documents. All such
registrations, filings, and reports will be truthfully completed, and true and
complete copies of such registrations, applications, consents, licenses,
permits, franchises, approvals, exemption certificates, filings, and reports
will be delivered to Lender upon request. Borrower shall promptly advise Lender
of any material changes with respect to its marketing or sales programs in any
jurisdiction, including jurisdictions other than the State of Rhode Island, and
at Lender's request from time to time, Borrower shall deliver to Lender (A)
written statements by any applicable governmental authorities,
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53
in form acceptable to Lender, stating that no registration is necessary for the
sale of Intervals in the particular state; (B) an opinion of counsel in form
acceptable to Lender and rendered by counsel acceptable to Lender, stating that
no such registration is necessary; or (C) such other evidence of compliance with
all Applicable Laws as Lender may require.
(n) Other Documents. Borrower shall maintain to the
satisfaction of Lender, and make available to Lender for inspection, accurate
and complete files relating to the Pledged Notes Receivable, and all of the
other Collateral, and such files shall contain true copies of each Pledged Note
Receivable, as amended from time to time (but only with Lender's prior written
consent), copies of all relevant credit memoranda relating to such Pledged Notes
Receivable, and all collection information and correspondence relating thereto.
(o) Further Assurances. Borrower shall execute and deliver, or
cause to be executed and delivered, such other and further agreements,
documents, instruments, certificates, and assurances as, in the judgment of
Lender exercised in good faith, may be necessary or appropriate in order more
effectively to evidence or secure, and to ensure the performance of, the
Obligations. In addition, Borrower shall deliver to Lender from time to time
upon request by Lender, such documents, instruments, and other materials or
items as Lender may reasonably require to evidence Borrower's compliance with
the covenants set forth in this Section 6.l.
(p) Expenses and Closing Fees. Whether or not the transactions
contemplated hereunder are consummated, Borrower shall pay all reasonable
expenses of Lender relating to negotiating, preparing, documenting, closing, and
enforcing this Agreement and the other Loan Documents, including but not limited
to:
(i) The cost of preparing, reproducing, and binding
this Agreement, the other Loan Documents, and all exhibits and schedules
thereto;
(ii) The reasonable fees and disbursements of
Lender's and Borrowers counsel;
(iii) Lender's out-of-pocket expenses;
(iv) All fees and expenses (including fees and
expenses of Lender's counsel) relating to any amendments, waivers, consents, or
subsequent closings or other transactions pursuant to the provisions hereof;
(v) All costs, outlays, legal fees, and expenses of
every kind and character had or incurred in: (A) the interpretation or
enforcement of any of the provisions of, or the creation, preservation, or
exercise by Lender of its rights and remedies under, any of the Loan Documents,
including the costs of appeal; (B) the preparation for, negotiations regarding,
consultations concerning, or the defense or prosecution of legal proceedings
involving any claim or claims made
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54
or threatened against Lender arising out of this transaction or the preservation
or protection of the Collateral securing the Loan or Advances made hereunder,
expressly including, without limitation, the defense by Lender of any legal
proceedings instituted or threatened by any Person to seek to recover or set
aside any payment or set off theretofore received or applied by Lender with
respect to the Obligations, and any and all appeals thereof; and (C) the
advancement of any expenses provided for under any of the Loan Documents;
(vi) All fees and expenses of the Title Insurance
Company, Lockbox Agent, Servicing Agent, and Custodian;
(vii) All costs and expenses incurred by Lender under
the Mortgage Note or the Receivables Note, and all late charges payable
thereunder; and
(viii) To the extent the same are not paid by an
Association, all real and personal property taxes and assessments, documentary
stamp and intangible taxes, sales taxes, recording fees, title insurance
premiums and other title charges, document copying, transmittal and binding
costs, appraisal fees, lien and judgment search costs, fees of architects,
engineers, environmental consultants, surveyors and any special consultants,
construction inspection fees, brokers' fees, escrow fees, wire transfer fees,
and all travel and out-of-pocket expenses of Lender to conduct inspections or
audits. Without limiting any of the foregoing, Borrower shall pay the costs of
Code and other searches, Code and other Loan Document recording and filing fees,
and applicable taxes and premiums on each mortgagee policy of title insurance
delivered to Lender pursuant to this Agreement.
(q) Indemnification of Lender. In addition to (and not in lieu
of) any other provisions hereof or of any other Loan Document providing for
indemnification in favor of Lender, Borrower and Guarantors hereby defend,
indemnify, and hold harmless Lender, its subsidiaries, other Affiliates,
officers, directors, agents, employees, representatives, consultants,
contractors, servants, and attorneys, as well as the respective heirs, personal
representatives, successors, and assigns of any or all of them (hereinafter
collectively referred to as the "Indemnified Lender Parties"), from and against,
and agree promptly to pay on demand or reimburse each of them with respect to,
any and all liabilities, claims, demands, losses, damages, costs, and expenses
(including, without limitation, reasonable attorneys' and paralegals' fees and
costs), actions or causes of action of any and every kind or nature whatsoever
asserted against or incurred by any of them by reason of or arising out of or in
any way, directly or indirectly, related or attributable to: (i) this Agreement,
the other Loan Documents, the Commitment Letter, or the Collateral; (ii) the
transactions contemplated under any of the Loan Documents, including, without
limitation, those in any way relating to or arising out of the violation of any
Applicable Laws; (iii) any breach of any covenant or agreement or the
incorrectness or inaccuracy of any representation or warranty of Borrower or any
Guarantor contained in this Agreement or any of the other Loan Documents
(including, without limitation, any certification of Borrower delivered to
Lender), including but not limited to the failure of any Pledged Note Receivable
to be legally enforceable by Lender in the event that it succeeds to all right,
title, and
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55
interest of Borrower therein in accordance with the provisions hereof or any of
the other Loan Documents; (iv) any and all taxes, including real estate,
personal property, sales, mortgage, excise, intangible, or transfer taxes (but
excluding all franchise taxes, taxes on capital and net worth, gross receipts
taxes, and taxes imposed on gross or net income), and any and all fees or
charges that may at any time arise or become due prior to the payment,
performance, and discharge in full of the Obligations; (v) the breach of any
representation or warranty set forth herein regarding any Environmental Laws;
(vi) the failure of Borrower to perform any obligation or covenant herein
required to be performed pursuant to any Environmental Laws; (vii) the use,
generation, storage, release, threatened release, discharge, disposal, or
presence on, under, or about the Resort of any Hazardous Materials (except to
the extent that liability of the Indemnified Lender Party with respect to such
matter would not exist but for the acts or omissions of such Indemnified Lender
Party as determined in a final, non-appealable adjudication by a court of
competent jurisdiction); (viii) the removal or remediation of any Hazardous
Materials from the Resort required to be performed pursuant to any Environmental
Laws or as a result of recommendations of any environmental consultant or as
required by Lender; (ix) claims asserted by any Person (including, without
limitation, any governmental or quasi-governmental agency, commission,
department, instrumentality or body, court, arbitrator, or administrative board
in connection with or in any way arising out of the presence, use, storage,
disposal, generation, transportation, release, or treatment of any Hazardous
Materials on, in, under, or affecting the Resort; (x) the violation or claimed
violation of any Environmental Laws in regard to the Resort; (xi) the
preparation of an environmental audit or report on the Resort not to exceed one
(1) per calendar year and premised upon the Lender's reasonable belief of the
existence of a violation of Environmental Laws, whether conducted by Lender,
Borrower, or another Person; (xii) the exercise by Borrower of any rights or
remedies under any Timeshare Documents; or (xiii) the exercise by Lender of any
rights or remedies under this Agreement or any of the other Loan Documents. Such
indemnification shall not give Borrower or Guarantors any right to participate
in the selection of counsel for Lender or the conduct or settlement of any
dispute or proceeding for which indemnification may be claimed. The provisions
of this Section shall survive the full payment, performance, and discharge of
the Obligations and the termination of this Agreement, and shall continue
thereafter in full force and effect. Notwithstanding the foregoing provisions of
this Section 6.1(q) to the contrary, Borrower shall not indemnify or hold Lender
harmless from and against any liabilities, claims, demands, losses, damages,
costs, or expenses incurred by Lender solely as a direct result of Lender's own
gross negligence or willful misconduct.
(r) Use of Borrower's and Guarantors' Names. Borrower and
Guarantors shall at all times during the term of the Loan permit Lender to use
the name of Borrower, Guarantors, and any of their Affiliates in any press
release, advertisement, or other promotional material disseminated regarding the
Loan.
(s) No Amounts Due. Borrower shall use its best efforts to
cause each Association to deliver a statement to Lender at the end of each
calendar year, commencing in the present calendar year and continuing throughout
the term of the Loan, indicating that no amounts are due and payable to the such
Association from Borrower, any Guarantor, or any Affiliate thereof and
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56
that all taxes and insurance premiums payable by such Association have been paid
when due. In the event that any such amount is due and owing to any Association,
such amount may be paid directly to the Association by Lender as an Advance
hereunder. Borrower hereby covenants that as of the date of this Agreement, no
amounts are due and payable to either Association from Borrower, Guarantors, or
any Affiliate thereof. Borrower agrees to submit annually to Lender, within
thirty (30) days after the end of the fiscal year of each Association, the
proposed annual operating and capital budget of such Association for the then
present fiscal year, certified by the president thereof as true and correct.
(t) Correction of Defects. Borrower shall promptly correct any
defect in the Improvements or any departure from the applicable Plans that has
not been approved in writing by Lender. No Advance of the Mortgage Component of
the Loan shall evidence a waiver of Lender's right to require Borrower's
compliance with this covenants
(u) Sign Regarding Financing. Within thirty (30) days
following the date hereof, Borrower shall erect and maintain (through the
Maturity Date) at a conspicuous location at the Resort, at Lender's expense, on
a site acceptable to Lender, a sign indicating that Lender is providing
financing for the Resort, and Borrower shall not remove and shall prevent the
removal or destruction of said sign without Lender's prior written approval.
(v) Notification of Claims by Subcontractors and Materialmen.
Borrower shall advise Lender promptly in writing if Borrower receives any
notice, written or oral, of any claim filed or asserted by any laborer,
subcontractor, or materialman in connection with any labor or materials
furnished in the construction of any of the Improvements.
6.2 Negative Covenants. For so long as any portion of the Obligations
remains unsatisfied, Borrower hereby covenants and agrees with Lender as
follows:
(a) Limitation on Other Liens/Further Encumbrances of
Collateral and Other Property. Without the prior written consent of Lender,
which may be granted, withheld, or conditioned, in Lender's sole and absolute
discretion, Borrower shall not obtain financing (other than in connection with
trade payables in an aggregate amount not to exceed $50,000) or grant Liens with
respect to all or any portion of the Collateral (whether now existing or created
hereafter) other than those in favor of Lender and the Permitted Liens and
Encumbrances. Borrower shall use its best efforts to prevent either Association
from granting a mortgage, security interest, Lien, or other encumbrance of any
type whatsoever in or to any Units or Intervals owned by such Association for
the benefit of the Purchasers.
(b) Restrictions on Transfers, Consolidations, and Mergers.
Except for the Permitted Liens and Encumbrances, neither Borrower nor any
Guarantor shall, without obtaining the prior written consent of Lender (which
consent may be given, withheld, or conditioned by Lender, in Lender's sole
discretion), whether voluntarily or involuntarily, by operation of law or
otherwise:
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57
(i) transfer, sell, pledge, convey, hypothecate, factor, or assign all or any
portion of the Collateral, other than the sale of Intervals in the ordinary
course of Borrower's business (subject to the payment to Lender of Unit Release
Fees as required hereunder); (ii) lease or license any portion of the
Collateral, or change the legal or actual possession or use thereof; or (iii)
permit the dilution, transfer, pledge, hypothecation, or encumbrance of any of
the ownership interests or stock of Borrower or any Guarantor other than the
reasonable and customary trading of the stock of Equivest on the public market.
Without limiting the generality of the preceding sentence, and subject to the
terms of this Agreement, the prior written consent of Lender shall be required
for (A) any transfer of the Collateral or any part thereof to a subsidiary or
other Affiliate of Borrower or otherwise; (B) any corporate merger or
consolidation, disposition, or other reorganization of Borrower or any
Guarantor, or the reclassification of any of the ownership interests or capital
stock of Borrower or any Guarantor; (C) any change in the ownership of Borrower
or any Guarantor, other than the reasonable and customary trading of the stock
of Equivest on the public market; and (D) any transfer of or change in ERC's
status as the sole member of Borrower. In the event that Lender, in its
reasonable discretion, is willing to consent to a transfer that would otherwise
be prohibited by this Section 6.2(b), Lender may condition its consent on such
reasonable terms and conditions as it desires, including, without limitation, an
increase in the Interest Rate and the requirement that Borrower pay a reasonable
transfer fee, together with any expenses incurred by Lender in connection with
the granting of such consent (including, without limitation, attorneys' fees and
expenses). If Borrower or any Guarantor violates the terms of this Section
6.2(b), in addition to any other rights or remedies that Lender may have
hereunder, pursuant to any other Loan Document, or at law or in equity, Lender
may, upon written notice to Borrower, increase, effective immediately as of the
date of such violation, the Interest Rate to the Default Rate.
(c) Use of Lender's Name. Without the prior written consent of
Lender, Borrower shall not, and shall not permit any Affiliate to, use the name
of Lender, of Credit Suisse First Boston Corporation, or of any other Affiliate
of Lender in any press release, advertising, or other promotional materials of
any kind, with the exception of the signs described in Section 6.1(u) above.
(d) Transactions with Affiliates. Without the prior written
consent of Lender, Borrower shall not enter into any transaction with any
Affiliate thereof in connection with the Resort or all or any portion of the
Collateral, including, without limitation, a transaction involving the purchase,
sale, or exchange of any assets or the rendering of any marketing, sales,
management, or other services, except in the ordinary course of Borrower's
business for full and fair consideration.
(e) Subordinated Obligation.
(i) Neither Borrower nor any Guarantor shall, directly or
indirectly, make or permit any payment to be made in respect of any
indebtedness, claims, rights, liabilities, or obligations, direct or contingent,
including, without limitation, the Subordinated Debt (as hereinbelow defined),
to any of its shareholders or other Affiliates or their respective successors
and assigns (hereinafter each referred to as a "Subordinated Party"), and
payment of any or all of the
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58
Subordinated Debt is hereby expressly made subordinate and junior in right of
payment and satisfaction in full of each and every Senior Obligation (as
hereinbelow defined); provided, however, that for so long as no Default or Event
of Default exists with respect to the Senior Obligations and payment of any such
Subordinated Debt would not render Borrower or any Guarantor insolvent or
subject to any voluntary or involuntary bankruptcy, receivership, liquidation,
reorganization, arrangement, assignment for the benefit of its creditors, or any
similar proceedings or occurrence, such Subordinated Debt may be repaid in the
ordinary course of Borrower's or the applicable Guarantor's business under such
regularly scheduled payment terms as are approved in writing by Lender.
(ii) Except as otherwise expressly provided in Section (i)
above, until each and every Senior Obligation has been paid and otherwise
satisfied in full, Borrower shall not make any payment of cash or its equivalent
or any transfer of securities or other property of any kind or character to any
Subordinated Party in respect of any of the Subordinated Debt.
(iii) In the event of (A) any insolvency, bankruptcy,
receivership, liquidation, reorganization, arrangement, assignment for the
benefit of creditors, or other similar proceeding relative to Borrower or any
Guarantor, any of Borrower's or a Guarantor's assets, or any Subordinated Party;
or (B) any proceeding for the voluntary or involuntary liquidation, dissolution,
or other winding up of Borrower or any Guarantor, whether or not in connection
with insolvency or bankruptcy proceedings, then and in any such event:
(1) The principal amount of, and all interest and
premium on, and all other amounts in respect of, the Senior Obligations
(including interest thereon accruing after the commencement of any such
proceeding) shall be paid in full before any payment or distribution of any
character, whether in cash, securities, or other property, may be made in
respect of the Subordinated Debt;
(2) Any payment or distribution of any character,
whether in cash, securities, or other property, that would otherwise (but for
the terms hereof) be payable or deliverable in respect of the Subordinated Debt
(including any payment or distribution in respect of the Subordinated Debt by
reason of any other indebtedness of Borrower or any Guarantor being subordinated
to the Subordinated Debt), shall be paid or delivered directly to Lender until
the principal amount of, and all interest and premium on, and all other amounts
in respect of, the Senior Obligations shall have been paid and otherwise
satisfied in full, and Borrower, Guarantors, and the Subordinated Parties
irrevocably authorize, empower, and direct all applicable receivers, trustees,
liquidators, conservators, and others having similar authority to effect all
such payments and deliveries; and
(3) For so long as any of the Senior Obligations have
not been paid and otherwise satisfied in full, each Subordinated Party and any
other holder of all or any portion of the Subordinated Debt shall: (A) execute
and deliver to Lender all such further documents and
<PAGE>
59
instruments confirming the authorization referred to in Sub-section (iii)(2)
above; (B) execute and deliver to Lender powers of attorney in form and
substance satisfactory to Lender specifically confirming Lender's rights
hereunder; (C) execute and deliver to Lender all such proofs of claim,
assignments of claim, and other instruments to enforce all claims upon or in
respect of the Subordinated Debt as may be requested by Lender; and (D) take all
further actions as Lender may reasonably request to enforce all claims upon or
in respect of the Subordinated Debt.
(iv) For purposes of this Section 6.2(e):
(A) "Subordinated Debt" shall mean any and
all indebtedness, claims, rights, obligations, and other liabilities of any and
every kind or character, whether now existing or hereafter arising, and whether
fixed or contingent, that Borrower or any Guarantor owes or might be obligated
to pay to any shareholder or other Affiliate thereof, together with any Liens,
security interests, collateral assignments, claims, and rights related thereto;
and
(B) "Senior Obligations" shall mean any and
all indebtedness, claims, rights, obligations, and other liabilities of any and
every kind or character, whether now existing or hereafter arising, and whether
fixed or contingent, that Borrower or any Guarantor owes or might be obligated
to pay Lender or any successor or assign thereof, pursuant to this Agreement or
any other Loan Document, together with any Liens, security interests, collateral
assignments, claims, and rights related thereto.
(v) If, notwithstanding any provisions of this
Section to the contrary, any payment or distribution of any type, whether in the
form of cash, securities, or other property, or any security shall be received
by the Subordinated Parties in contravention of the terms, provisions, and
conditions hereof and before the Senior Obligations have been paid and otherwise
satisfied in full, such payment, distribution, or security shall not be
commingled with any asset of the Subordinated Parties but shall instead be
segregated and held in trust for the benefit of, and shall be paid over,
delivered, and transferred to, Lender for application to the payment of all
Senior Obligations remaining unpaid until the Senior Obligations have been paid
and otherwise satisfied in full.
(vi) Until the Senior Obligations have been paid and
otherwise satisfied in full, the Subordinated Parties shall have no right of
subrogation, reimbursement, or indemnity whatsoever and no right of recourse to
or with respect to any assets of Borrower or any Guarantor or to any collateral
or security for the Senior Obligations.
(vii) Borrower and Guarantors agree that in the event
that any Subordinated Debt or other financial obligation of Borrower or any
Guarantor becomes due and payable prior to its expressed maturity for any
reason, Borrower or the applicable Guarantor shall promptly provide Lender with
written notice thereof.
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60
(viii) For so long as any of the Senior Obligations
remain unpaid or otherwise unsatisfied in full, Lender may exercise any and all
rights, powers, and privileges that it may now have or hereafter acquire with
respect to any of the collateral or security for any of the Senior Obligations,
without having to obtain any consent or approval of any kind from Borrower, any
Guarantor, or any Subordinated Party and without any accountability thereto, nor
shall Lender have any liability whatsoever to Borrower, any Guarantor, or any
Subordinated Party for any action taken or any failure to act with respect to
any such collateral or security, subject to the Loan Documents.
(ix) Lender's rights under this Section 6.2(e) shall
pass to and may be relied upon and enforced by any transferee or subsequent
holder or beneficiary of any of the Senior Obligations. In the event of any
sale, assignment, transfer, or other disposition of all or any portion of any
Subordinated Debt, Borrower, the applicable Guarantor(s), and any applicable
Subordinated Party shall cause the purchaser, assignee, or transferee of such
Subordinated Debt to execute and deliver to Lender a written instrument, in form
and substance acceptable to Lender, providing for the continued subordination of
the subject Subordinated Debt to the Senior Obligations as provided herein and
for the continued effectiveness and enforceability of all of Lender's rights
hereunder.
(x) Borrower and Guarantors shall refrain from taking
any action that is in any way inconsistent with or in derogation of the
foregoing subordination or of the rights of Lender hereunder and hereby covenant
to perform all such further acts as might, in Lender's discretion, be necessary
or appropriate in order to effectuate the purposes and intent of this Agreement.
Without limiting the generality of the foregoing, Borrower and Guarantors shall
cause all evidence of the Subordinated Debt, including but not limited to
promissory notes, to set forth the provisions hereof or to bear a legend in form
and substance satisfactory to Lender to the effect that such promissory note or
other evidence is subordinate to the Senior Obligations and subject to all of
the terms, provisions, and conditions of this Section 6.2(e).
(xi) The terms of this Section 6.2(e), the
subordination effected hereby, and the rights of Lender and the obligations of
Borrower and Guarantors arising hereunder, shall not be affected, modified, or
impaired in any manner or to any extent by: (A) any amendment or modification of
or supplement to the Loan Agreement or any other Loan Document, including,
without limitation, any amendment or modification of the terms, provisions, or
conditions thereof, including but not limited to any increase in the amount of
any of the Senior Obligations or any extension of the time period in which any
of the Senior Obligations must be paid or otherwise satisfied; (B) the lack of
validity, legality, or enforceability of any of such documents or instruments;
(C) any exercise or non-exercise of any right, power, or remedy under or in
respect of the Senior Obligations or any such document or instrument; or (D) any
waiver, consent, release, indulgence, extension, renewal, modification, delay,
or other action, inaction, or omission in respect of the Senior Obligations or
any such document or instrument or in respect of any of the collateral or
security for any of the Senior Obligations, whether or not Borrower or the
applicable Guarantor shall have had notice or knowledge of any of the foregoing
and whether or not Borrower or such Guarantor shall have consented thereto.
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(f) Name Change. Neither Borrower nor Guarantors shall change
their names, their chief executive offices, or the locations at which they do
business without providing Lender at least thirty (30) days' prior written
notice thereof and executing, at Borrower's sole expense, such UCC-3 amendments
and all other documents and instruments as Lender, in its sole discretion, deems
reasonably necessary or appropriate in order to continue the perfection of its
Lien in and to all of the Collateral.
(g) Collateral. Neither Borrower nor Guarantors shall take any
action (or permit or consent to the taking of any action) that might materially
impair the value of all or any portion of the Collateral or any of the rights of
Lender with respect to the Collateral, nor shall Borrower or any Guarantor cause
or permit any material amendment to or modification of the form or terms of any
of the Pledged Notes Receivable, or Timeshare Documents, including but not
limited to the Declarations, without Lender's prior written consent.
6.3 Minimum Net Worth Requirement; Minimum Quarterly Net Income
Requirement. Borrower and Guarantors agree to maintain the Minimum Net Worth
Requirement and the Minimum Quarterly Net Income Requirement at all times during
the term of this Agreement.
SECTION 7. EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following occurs:
7.1 Payment Default. If Borrower fails to make, as and when due,
whether by acceleration or otherwise, any payment or mandatory prepayment of
principal, interest, or other fees or amounts of any and every kind due
hereunder or pursuant to any of the other Loan Documents. Notwithstanding the
foregoing sentence to the contrary, a payment by Borrower hereunder or pursuant
to any of the other Loan Documents shall not be deemed delinquent hereunder as
long as the entire requisite amount is actually received by Lender, without
notice or demand of any kind by Lender, within five (5) days following the date
upon which such payment is due.
7.2 Covenant Defaults. If Borrower fails fully and timely to perform or
observe any non-monetary covenant, agreement, or warranty contained in this
Agreement or in any of the other Loan Documents and such failure continues for a
period of fifteen (15) days after notice of such failure is furnished by Lender;
provided, however, that if Borrower commences to cure such failure within such
fifteen (15) day period but, because of the nature of such failure, cure cannot
reasonably be completed within fifteen (15) days, notwithstanding Borrower's
good faith best efforts to do so, then, provided that Borrower diligently seeks
to complete such cure, an Event of Default shall not be deemed to have occurred
unless such failure continues for a total of thirty (30) days after notice of
such failure has been given by Lender, provided that such failure does not (i)
result in substantial financial hardship to Lender; or (ii) materially impair
the value of all or any portion of the Collateral, as determined in the
reasonable judgment of Lender.
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7.3 Warranties or Representations. If any statement or representation
made by or on behalf of Borrower or any Guarantor in this Agreement, in any of
the other Loan Documents, or in any document, instrument, certificate, opinion,
or other item furnished pursuant to the Loan Documents, is false, misleading, or
incorrect in any material respect as of the date made or reaffirmed.
7.4 Enforceabilty. If (a) any Lien granted by Borrower to Lender in
connection with the Loan is or becomes invalid or unenforceable or is not, or
ceases to be, a perfected first priority Lien in favor of Lender encumbering the
asset which it is intended to encumber, and Borrower fails to cause such Lien to
become a valid, enforceable, first and prior Lien in a manner satisfactory to
Lender, in its sole discretion, within ten (10) days after Lender delivers
written notice thereof to Borrower; or (b) if any material term, provision, or
condition of any Loan Document becomes invalid or unenforceable by Lender and
its successors and assigns.
7.5 Insolvency. If Borrower or any Guarantor becomes insolvent or
otherwise generally unable to pay its debts as and when they become due or
payable.
7.6 Involuntary Proceedings. If a case is commenced or a petition is
filed against Borrower or any Guarantor under any Debtor Relief Law, a receiver,
conservator, liquidator, or trustee of Borrower or any Guarantor or of any
material asset of Borrower or any Guarantor is appointed by court order and such
order remains in effect for more than forty-five (45) days, or if any material
asset of Borrower or any Guarantor is sequestered by court order and such order
remains in effect for more than forty-five (45) days.
7.7 Voluntary Proceedings. If Borrower or any Guarantor voluntarily
seeks, consents to, or acquiesces in the benefit of any provision of any Debtor
Relief Law, whether now or hereafter in effect, consents to the filing of any
petition against it under such law, makes an assignment for the benefit of its
creditors, admits in writing its inability to pay its debts generally as they
become due, or consents to or suffers the appointment of a receiver, trustee,
liquidator, or conservator for it or any part of its assets.
7.8 Attachment; Judgment; Tax Liens. The issuance, filing, levy, or
seizure against all or any portion of the Collateral or any assets of Borrower
or any Guarantor, of one (1) or more attachments, injunctions, executions, tax
liens, or judgments for the payment of money cumulatively in excess of $10,000,
that is not discharged in full or stayed within thirty (30) days after such
issuance, filing, levy, or seizure.
7.9 Going Concern Reference. If Borrower's or any Guarantor's annual
audited financial statements required to be furnished to Lender, pursuant to
Section 6.1(g) hereof, make a "going concern" reference or otherwise question
Borrower's or such Guarantor's continuing viability as a going concern.
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7.10 Failure to Deposit Proceeds. If Borrower fails to deliver any
payments received under any Pledged Note Receivable directly to Lender or
Lockbox Agent as required by Section 2.4 hereof (other than inadvertent failures
that are corrected immediately upon discovery), or if Borrower takes any other
action which Lender shall deem to be a conversion of all or any portion of the
Collateral or fraudulent with respect to Lender.
7.11 Removal of Collateral. If Borrower conceals, removes, transfers,
conveys, assigns, or permits to be concealed, removed, transferred, conveyed, or
assigned, any of the Collateral in violation of the terms of any of the Loan
Documents or with the intent to hinder, delay, or defraud its creditors or any
of them, including, without limitation, Lender.
7.12 Other Defaults. If a material default or event of default occurs
in connection with any other loans or financing arrangements that Borrower, any
Guarantor, or any of their respective Affiliates may have with Lender, including
but not limited to the Timeshare Receivables Purchase Facility, the Timeshare
Construction Credit Facility, the Timeshare Receivables Hypothecation Facility,
and the Bridge Loan Credit Facility.
7.13 Material Adverse Change. If there occurs any material adverse
change in the financial condition of Borrower or any Guarantor.
7.14 Minimum Net Worth Requirement. Borrower's and Guarantors' failure
for any reason to satisfy the Minimum Net Worth Requirement.
7.15 Minimum Quarterly Net Income Requirement. Equivest's failure for
any reason to satisfy the Minimum Quarterly Net Income Requirement.
7.16 Default by Borrower in Other Agreements. Any default by Borrower
(a) in the payment of any indebtedness to Lender; (b) in the payment or
performance of other indebtedness for borrowed money or obligations in excess of
$50,000 secured by all or any portion of the Collateral; or (c) in the payment
or performance of any other material indebtedness or obligations.
7.17 Violation of Negative Covenants. If Borrower or any Guarantor
violates any negative covenant set forth in Section 6.2 hereof.
7.18 Attachment; Judgment; Tax Liens. The issuance, filing, levy, or
seizure against all or any portion of the Resort (including the Mortgaged Real
Property thereat) of one (1) or more attachments, injunctions, executions, tax
liens, or judgments for the payment of money cumulatively in excess of $25,000,
that is not discharged in full or stayed within sixty (60) days after such
issuance, filing, levy, or seizure.
7.19 Declarations. If either Declaration or the condominium or
timeshare regime created thereby at the Resort is amended, restated, or
terminated without Lender's prior written consent.
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7.20 Transfer of Property. Except for the sale of Intervals in the
ordinary course of Borrower's business in accordance with the terms hereof and
of the other Loan Documents, and except for transfers due to involuntary
condemnation that do not render the Resort useless for its intended purpose, if
Borrower, without Lender's prior written consent, sells, conveys, or further
encumbers all or any part of its interest in the Resort or in any of the
personalty located thereon or used or intended to be used in connection
therewith. For purposes of this Section, an assignment, sale, or transfer shall
also include the transfer of any ownership interest in Borrower other than to an
existing member thereof.
7.21 Lien Against Resort. Except for the Permitted Liens and
Encumbrances or as otherwise specifically provided herein to the contrary, if
Borrower or either Association grants any Lien, security interest, or other
encumbrance upon any Unit, Interval, Common Area, or all or any other portion of
the Resort or all or any portion of the Collateral other than in favor of
Lender, unless approved by Lender in writing, in its sole and absolute
discretion.
7.22 Title. If any violation or breach shall occur in any agreement,
covenant, or restriction affecting title to all or any portion of the Resort,
the Mortgaged Real Property, or any Encumbered Intervals, including but not
limited to any Permitted Liens and Encumbrances, and such violation or breach is
not cured within any time frame allowed hereunder or thereunder.
7.23 Loss of License. The suspension, loss, revocation, or failure to
renew or file for renewal of any legally required registration, approval,
license, permit, or franchise now held or hereafter acquired by Borrower with
respect to the Resort or the marketing or sale of Intervals thereat or with
respect thereto, or the failure to pay any amount which is necessary for the
continued operation of the Resort in compliance with all Applicable Laws, which
loss, revocation, failure to renew or file for renewal, or failure to pay is not
cured within thirty (30) days following such occurrence.
7.24 Suspension of Sales. The issuance of any stay order, cease and
desist order, injunction, temporary restraining order, or other judicial or
nonjudicial sanction limiting or materially affecting any Interval marketing or
sales activities at or with respect to the Resort or the enforcement of Lender's
rights or remedies hereunder or pursuant to any of the other Loan Documents,
which order or sanction is not terminated or dissolved within thirty (30) days
after its issuance.
7.25 Failure to Convey. The failure for any reason of Borrower to
convey to the Timeshare Association, free and clear of all Liens, security
interests, and other encumbrances other than the Permitted Liens and
Encumbrances, all Units within the Resort Condominium Regime that are not
included within the Mortgaged Real Property as of the Closing Date by no later
than thirty (30) days following the Closing Date.
7.26 Failure to Annex. The failure for any reason of Borrower to annex
all of the seventy-one (71) residential Units and any and all Resort Amenity
Units, as such term is or may be defined
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in the Condominium Declaration and/or the Timeshare Declaration, that comprise
the second phase of the Resort into the Resort Condominium Regime by no later
than thirty (30) days following the Closing Date.
SECTION 8. REMEDIES
8.1 Remedies Upon Default. Should an Event of Default occur, Lender may
immediately take any one (1) or more of the actions described in this Section 8,
all without notice to Borrower or Guarantors:
(a) Acceleration. Declare the unpaid balance of the Loan, or
any part thereof, immediately due and payable, whereupon the same shall be due
and payable to Lender.
(b) Termination of Obligation to Advance. Terminate any
commitment or obligation of Lender hereunder to make Advances of the Loan in its
entirety, or any portion of any such commitment, and/or terminate Lender's
further performance under this Agreement and/or any other document or instrument
to which Lender and Borrower or any Guarantor (or any other Affiliate of
Borrower) are parties, without further liability or obligation to Borrower or
Guarantors, to the extent Lender shall deem appropriate, in its sole discretion,
all without notice to Borrower or Guarantors.
(c) Termination of Obligation to Grant Partial Releases. Cease
granting any partial releases from the Lien of the Resort Mortgage (to the
extent required herein).
(d) Judgment. Reduce Lender's claim to judgment, foreclose,
and/or otherwise enforce each Lien and security interest of Lender in and to all
or any part of the Collateral by any judicial or other procedure available to
Lender. Lender's right to sue and recover a judgment, either before, after, or
during the pendency of any proceeding for the enforcement of the Resort Mortgage
and the right of Lender to recover such judgment shall not be affected by any
taking, possession, or foreclosure sale hereunder or by the exercise of any
other right, power, or remedy for the enforcement of the terms of the Resort
Mortgage or the foreclosure of the Lien thereof.
(e) Foreclosure. Whether or not Lender takes possession of the
Collateral, proceed to foreclose the Resort Mortgage and sell the Mortgaged Real
Property in its entirety or in separate increments under the judgment of decree
of a court or courts of competent jurisdiction and pursue any other remedy
available to it, at law or in equity, all as Lender shall deem appropriate. Upon
the commencement of suit or foreclosure proceedings with respect to the Resort
Mortgage, the unpaid principal balances of the Mortgage Note and the Receivables
Note, if not previously accelerated and declared due, together with all interest
accrued thereon and all other Obligations, shall immediately be due and payable.
Upon any foreclosure sale pursuant to judicial proceedings, Lender may bid for
and purchase all or any portion of the Mortgaged Real Property and, upon
compliance with the terms of sale, may hold, retain, possess, and dispose
thereof. In the case of a
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foreclosure sale of all or any portion of the Mortgaged Real Property and the
application of the proceeds of sale to the payment of the debt secured by the
Resort Mortgage, Lender shall be entitled to enforce payment of and to receive
all amounts then remaining due and unpaid under the Mortgage Note and the
Receivables Note, and Lender shall be entitled to recover judgment for any
portion of the debt remaining unpaid, with interest thereon. Borrower agrees, to
the full extent that it may lawfully so agree, that no recovery of any such
judgment by Lender and no attachment or levy of any execution upon any such
judgment upon the Resort or upon any other property shall in any manner or to
any extent affect the Lien of the Resort Mortgage upon the Mortgaged Real
Property or any part thereof or any Lien, rights, powers, or remedies of Lender
hereunder, and such Lien, rights, powers, and remedies shall continue
unimpaired.
(f) Lender's Right to Take Possession, Operate, and Apply
Income.
(i) Upon Lenders demand, Borrower shall forthwith
surrender to Lender the actual possession of any or all of the Resort and, to
the extent permitted by law, Lender may enter and take possession of the Resort,
exclude Borrower and its employees and other agents wholly therefrom, and have
access with Borrower to Borrower's books, papers, and accounts. If Borrower
fails to surrender or deliver all or any portion of the Resort to Lender upon
demand, Lender may obtain a judgment or decree conferring upon Lender the right
to immediate possession or requiring Borrowers to deliver immediate possession
of all or part of the Resort to Lender, and Borrower hereby specifically
consents to the entry of such a judgment or decree;
(ii) Upon every such entering upon or taking of
possession, Lender may hold, store, use, operate, manage, and control the
Resort, conduct Borrower's business at the Resort and, from time to time, do any
of the following things as Lender may deem necessary, appropriate, or desirable:
(A) Perform all maintenance, repairs,
renewals, replacements, additions, and improvements deemed reasonably necessary
or proper to the Resort and purchase or otherwise acquire additional fixtures,
personalty, and other property;
(B) Insure, manage, and operate the Resort
and exercise all of the rights and powers of Borrower (in Lender's name or
otherwise) with respect to the insurance, management, and operation of the
Resort;
(C) Enter into any and all agreements with
respect to the exercise by others of any of the powers herein granted to Lender;
(D) Perform or cause to be performed any all
work and labor reasonably necessary to complete any Improvements in accordance
with the Plans therefor; and
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(E) Disburse that portion of the Loan
proceeds not previously disbursed (including any retainage) to the extent
reasonably necessary to complete construction of any Improvements in accordance
with the Plans therefor, and if such completion requires a greater amount than
the remaining undisbursed portion of either the Mortgage Component or the
Receivables Component of the Loan, disburse such additional funds, all of which
shall be deemed to have been disbursed to Borrower and shall be secured by the
Resort Mortgage. For this purpose, Borrower hereby constitutes and appoints
Lender as its true and lawful attorney-in-fact with full power of substitution
to complete the construction of any Improvements in Borrower's name and hereby
empower Lender as said attorney-in-fact to take all actions necessary in
connection therewith, including but not limited to the following: (1) to use
funds of Borrower, including any balance that may be held in escrow and any
proceeds of the Loan that may remain unadvanced hereunder, for the purpose of
completing the Improvements in accordance with the Plans and all Applicable
Laws; (2) to make such additions and changes and corrections in the Plans as
shall be necessary or desirable to complete the Improvements in substantially
the manner contemplated by the Plans; (3) to employ such contractors,
subcontractors, agents, architects, engineers, and inspectors as shall be
reasonably required for said purposes; (4) to pay, settle, or compromise all
existing or future bills and claims that are or may become Liens against the
Resort or that may be necessary or desirable for the completion of the
Improvements or the clearance of title to the Resort; (5) to execute all
applications and certificates in Borrower's name that may be required by any
construction contract; and (6) to do any and every act with respect to the
construction of the Improvements that Borrower may do on its own behalf. Such
power of attorney shall be deemed to be a power coupled with an interest that
cannot be revoked by death or otherwise. Said attorney-in-fact shall also have
power to prosecute and defend all actions and proceedings in connection with the
construction of the Improvements and to take such action and require such
performance as ft deems reasonably necessary or appropriate. In accordance
therewith, Borrower hereby assigns and quitclaims to Lender all amounts advanced
hereunder conditioned upon the use of said sums, if any, for the completion of
the Improvements.
(iii) Lender may collect and receive all of the
income, revenues, rents, issues, and profits of the Resort, including those past
due as well as those accruing thereafter. Lender shall apply such amounts
received by Lender first to the payment of accrued interest and then to the
payment of principal and all other amounts or indebtedness that may be due
hereunder, after deducting therefrom:
(A) All expenses of taking, holding,
managing, and operating the Resort (including compensation for the services of
all Persons employed for such purposes);
(B) The cost of all such maintenance,
repairs, renewals, replacements, additions, betterments, improvements,
purchases, and acquisitions;
(C) The cost of insurance;
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(D) Such taxes, assessments, and other
charges relating to the Resort Mortgage as Lender may determine to pay;
(E) Other proper charges upon the Resort or
any part thereof; and
(F) The reasonable compensation, expenses,
and disbursements of the attorneys and other agents of Lender, including
attorneys' fees and court costs.
(iv) If an Event of Default giving rise to pursuit of
the foregoing remedies shall have been cured, Lender may, in its sole
discretion, surrender possession of the Resort to Borrower; provided, however,
that Lenders right to take possession and to pursue any other rights or remedies
hereunder or pursuant to any of the other Loan Documents shall exist if any
subsequent Event of Default shall occur.
(g) Sale of Collateral. Exercise all the rights and remedies
of a secured party under the Code (whether or not the Code applies to the
affected Collateral), including (i) require Borrower to, and Borrower hereby
agrees that it will, at its expense and upon request of Lender forthwith,
assemble all or part of the Collateral as directed by Lender and make it
available to Lender at a place to be designated by Lender that is reasonably
convenient to both parties; (ii) enter upon any premises of Borrower and take
possession of the Collateral; and (iii) sell the Collateral or any part thereof
in one (1) or more parcels at public or private sale, at any of Lender's offices
or elsewhere, at such time or times, for cash, on credit, or for future
delivery, and at such price or prices and upon such other terms as Lender may
deem commercially reasonable. Borrower agrees that, to the extent notice of sale
shall be required by law, ten (10) days' notice of the time and place of any
sale shall constitute reasonable notification. At any sale of the Collateral, if
permitted by law, Lender may bid (which bid may be, in whole or in part, in the
form of cancellation of indebtedness) for the purchase of the Collateral or any
portion thereof for the account of Lender. Borrower shall remain liable for any
deficiency. Lender shall not be required to proceed against any Collateral but
may proceed against any or Borrower directly. To the extent permitted by law,
Borrower hereby specifically waives all rights of redemption, stay, or appraisal
that it has or may have under any law now existing or hereafter enacted.
(h) Retention of Collateral. At its discretion, retain such
portion of the Collateral as shall aggregate in value to an amount equal to the
total amount owed by Borrower pursuant to the Loan Documents, in satisfaction of
the Obligations, when ever the circumstances are such that Lender is entitled
and elects to do so under applicable law.
(i) Receiver. Apply by appropriate procedures for the
appointment of a receiver who shall have the authority to enter upon and take
possession of any or all of the Resort, collect the rents and profits generated
therefrom, and apply the same as the court may direct. Borrower hereby consents
to any such appointment. The receiver shall have all of the rights and powers
permitted
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under the laws of the State of Rhode Island. All costs and expenses (including
receiver's fees, attorneys' fees and costs, and other amounts) incurred in
connection with the appointment of a receiver shall be secured by the Resort
Mortgage.
(j) Purchase of Collateral. Buy all or any part of the
Collateral at any public or private sale.
(k) Exercise of Other Rights. Lender shall have all the rights
and remedies of a secured party under the Code and other legal and equitable
rights to which it may be entitled, including, without limitation, and without
notice to Borrower or Guarantors, the right to continue to collect all payments
made on the Pledged Notes Receivable and to apply such payments to the
Obligations, and to sue in its own name the other maker of any defaulted Pledged
Note Receivable. Lender may also exercise any and all other rights or remedies
afforded by any other Applicable Laws or by the Loan Documents, as Lender shall
deem appropriate, at law, in equity, or otherwise, including but not limited to
the right to bring suit or other proceeding, either for specific performance of
any covenant or condition contained in the Loan Documents or in aid of the
exercise of any right or remedy granted to Lender in the Loan Documents. Lender
shall also have the right to require Borrower to assemble any of the Collateral
not in Lender's possession, at Borrower's expense, and make it available to
Lender at a place to be determined by Lender that is reasonably convenient to
both parties, and Lender shall have the right to take immediate possession of
all or any portion of the Collateral and may enter the Resort or any of the
premises of Borrower or wherever the Collateral shall be located, with or
without process of law wherever the Collateral may be, and, to the extent such
premises are not the property of Lender, to keep and store the same on said
premises until sold (and if said premises be the property of Borrower, Borrower
agrees not to charge Lender for use and occupancy, rent, or storage of the
Collateral, for a period of at least sixty (60) days after sale or disposition
of the Collateral).
8.2 Notice of Sale. Reasonable notification of the time and place of
any public sale of the Collateral or reasonable notification of the time after
which any private sale or other intended disposition of the Collateral is to be
made shall be sent to Borrower and to any other Person entitled under the Code
to notice; provided, however, that if the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender may sell or otherwise dispose of the Collateral without advertisement or
other notice of any kind. It is agreed that notice sent not less than ten (10)
calendar days prior to the taking of the action to which such notice relates is
reasonable notification and notice for the purposes of this Section 8.2. Lender
shall have the right to bid at any public or private sale on its own behalf. Out
of money arising from any such sale, Lender shall retain an amount equal to all
costs and charges, including attorneys' fees, that it has incurred or may incur
for advice, counsel, or other legal services or for pursuing, reclaiming,
seeking to reclaim, taking, keeping, removing, storing, and advertising such
Collateral for sale, selling same, and any and all other charges and expenses in
connection therewith and in satisfying any prior Liens thereon. Any balance
shall be applied against the Obligations, and in the event of deficiency,
Borrower shall remain liable to Lender. In the event of any surplus, such
surplus shall be paid to
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Borrower or to such other Persons as may be legally entitled to such surplus.
If, by reason of any suit or proceeding of any kind, nature, or description
against Borrower, or by Borrower or any other party against Lender, which in
Lender's sole discretion makes it advisable for Lender to seek counsel for the
protection and preservation of its Liens and security interests, or to defend
its own interest, such expenses and counsel fees shall be allowed to Lender, and
the same shall be made a further charge and Lien upon the Collateral.
In view of the fact that federal, state, and other securities laws may
impose certain restrictions on the methods by which a sale of certain Collateral
may be effected after an Event of Default, Borrower agrees that upon the
occurrence or existence of an Event of Default, Lender may, from time to time,
attempt to sell all or any part of such Collateral by means of a private
placement restricting the bidding and prospective purchasers to those who will
represent and agree that they are purchasing for investment only and not for, or
with a view to, distribution. In so doing, Lender may solicit offers to buy such
Collateral, or any part of it for cash, from a limited number of investors
deemed by Lender, in its reasonable judgment, to be responsible parties who
might be interested in purchasing the Collateral, and if Lender solicits such
offers from not less than two (2) such investors, then the acceptance by Lender
of the highest offer obtained therefrom shall be deemed to be a commercially
reasonable method of disposition of such Collateral.
8.3 Application of Collateral; Termination of Agreements. Upon the
occurrence of any Event of Default, Lender may, with or without proceeding with
such sale or foreclosure or demanding payment or performance of the Obligations,
without notice, terminate Lender's further performance under this Agreement or
any other agreement or agreements between Lender and Borrower, any Guarantor, or
any Affiliate thereof, without further liability or obligation by Lender, and
may also, at any time, appropriate and apply on any Obligations any and all
Collateral in its, Custodian's, or Lockbox Agent's possession, custodian, or
control any and all balances, credits, deposits, accounts, reserves,
indebtedness, or other monies due or owing to Borrower held by Lender hereunder
or under any other financing agreement or otherwise, whether accrued or not.
Neither such termination, nor the termination of this Agreement by lapse of
time, the giving of notice, or otherwise, shall absolve, release, or otherwise
affect the liability of Borrower in respect of transactions prior to such
termination, or affect any of the Liens, security interests, rights, powers, and
remedies of Lender, but they shall, in all events, continue until all of the
Obligations have been satisfied in full.
8.4 Rights of Lender Regarding Collateral. In addition to all other
rights possessed by Lender, Lender, at its option, may from time to time after
there shall have occurred an Event of Default, and for so long as such Event of
Default remains uncured, in its sole discretion, take the following actions:
(a) Transfer all or any part of the Collateral into the name
of Lender or its nominee;
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(b) Take control of the proceeds of any of the Collateral;
(c) Extend or renew the Loan and grant releases, compromises,
or indulgences with respect to the Obligations, any portion thereof, any
extension, or renewal thereof, or any security therefor, to any obligor
hereunder or thereunder; and
(d) Exchange certificates or instruments representing or
evidencing the Collateral for certificates or instruments of smaller or larger
denominations for any purpose consistent with the terms of this Agreement.
8.5 Delegation of Duties and Rights. Lender may perform any of its
duties and/or exercise any of its rights or remedies under the Loan Documents by
or through its officers, directors, employees, attorneys, agents, or other
representatives. To the maximum extent practicable in light of all relevant
facts and circumstances, Lender will attempt to avoid any duplication of effort
and cost to Borrower in connection with any such delegation on Lender's part.
8.6 Lender Not in Control. None of the covenants or other provisions
contained in this Agreement or in any other Loan Document shall give or be
interpreted as giving Lender the right or power to exercise control over the
affairs and/or management of Borrower or any Guarantor.
8.7 Waivers. THE ACCEPTANCE BY LENDER AT ANY TIME AND FROM TIME TO TIME
OF PARTIAL PAYMENTS OF THE LOAN OR PERFORMANCE OF THE OBLIGATIONS SHALL NOT BE
DEEMED TO BE A WAIVER OF ANY EVENT OF DEFAULT THEN EXISTING. NO WAIVER BY LENDER
OF ANY EVENT OF DEFAULT SHALL BE DEEMED TO BE A WAIVER OF ANY OTHER OR
SUBSEQUENT EVENT OF DEFAULT. NO DELAY OR OMISSION BY LENDER IN EXERCISING ANY
RIGHT OR REMEDY UNDER THE LOAN DOCUMENTS SHALL IMPAIR SUCH RIGHT OR REMEDY OR BE
CONSTRUED AS A WAIVER THEREOF OR AN ACQUIESCENCE THEREIN, NOR SHALL ANY SINGLE
OR PARTIAL EXERCISE OF ANY SUCH RIGHT OR REMEDY PRECLUDE OTHER OR FURTHER
EXERCISES THEREOF, OR THE EXERCISE OF ANY OTHER RIGHT OR REMEDY UNDER THE LOAN
DOCUMENTS OR OTHERWISE. FURTHER, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT OR BY APPLICABLE LAW, BORROWER AND EACH AND EVERY SURETY, ENDORSER,
GUARANTOR, AND OTHER PERSON LIABLE FOR THE PAYMENT OR PERFORMANCE OF ALL OR ANY
PORTION OF THE OBLIGATIONS, SEVERALLY WAIVE NOTICE OF THE OCCURRENCE OF ANY
DEFAULT, EVENT OF DEFAULT, PRESENTMENT, AND DEMAND FOR PAYMENT, PROTEST, AND
NOTICE OF PROTEST, NOTICE OF INTENTION TO ACCELERATE, ACCELERATION, AND
NONPAYMENT, AND AGREE THAT THEIR LIABILITY SHALL NOT BE AFFECTED BY ANY RENEWAL
OR EXTENSION IN THE TIME
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72
OF PAYMENT OF THE LOAN, OR BY ANY RELEASE OR CHANGE IN ANY SECURITY FOR THE
PAYMENT OR PERFORMANCE OF THE LOAN, REGARDLESS OF THE NUMBER OF SUCH RENEWALS,
EXTENSIONS, RELEASES, OR CHANGES.
Borrower's Initials: _______
Guarantors' Initials: _______
8.8 Cumulative Rights. All rights and remedies available to Lender
under the Loan Documents shall be cumulative of and in addition to all other
rights and remedies granted to Lender under any of the Loan Documents, at law,
or in equity, whether or not the Loan is due and payable and whether or not
Lender shall have instituted any suit for collection or other action in
connection with or pursuant to the Loan Documents.
8.9 Expenditures by Lender. Any amounts expended by or on behalf of
Lender pursuant to the exercise of any right or remedy provided herein or
available at law or in equity shall be deemed an Advance hereunder, become part
of the Obligations, and shall bear interest at the Default Rate from the date of
such expenditure until the date repaid.
8.10 Diminution In Value of Collateral. Lender shall not have any
liability or responsibility whatsoever for any diminution or loss in value of
any of the Collateral, except for that which occurs solely as a direct result of
Lender's gross negligence or willful misconduct.
SECTION 9. CERTAIN RIGHTS OF LENDER
9.1 Protection of Collateral. Lender may, at any time and from time to
time, take such actions as Lender deems necessary or appropriate to protect
Lendees Liens and security interests in and to preserve the Collateral, and to
establish, maintain, and protect the enforceability of Lender's rights with
respect thereto, all at the expense of Borrower. Borrower agrees to cooperate
fully with all of Lenders efforts to preserve the Collateral and Lenders Liens,
security interests, and rights and will take such actions to preserve the
Collateral and Lender's Liens, security interests, and rights as Lender may
direct, including, without limitation, by promptly paying, upon Lender's demand
therefor, all documentary stamp taxes or other taxes that may be or may become
due in respect of any of the Collateral. All of Lender's expenses of preserving
the Collateral and its Liens and security interests and rights therein shall be
added to the principal amount of the Loan and secured by the Collateral.
9.2 Performance by Lender. If Borrower fails to perform any agreement
contained herein, Lender may itself perform, or cause the performance of, such
agreement, and the expenses of Lender incurred in connection therewith shall be
payable by Borrower under Section 9.5 below. In no event, however, shall Lender
have any obligation or duty whatsoever to perform any covenant or agreement of
Borrower contained herein, in any of the other Loan Documents, or in any
Timeshare Documents, and any such performance by Lender shall be wholly
discretionary with Lender. The
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73
performance by Lender of any agreement or covenant of Borrower on any occasion
shall not give rise to any duty on the part of Lender to perform any such
agreements or covenants on any other occasion or at any time. In addition,
Borrower acknowledges that Lender shall not at any time or under any
circumstances whatsoever have any duty to Borrower or to any other Person to
exercise any of Lender's rights or remedies hereunder.
9.3 No Liability of Lender. Lender is obligated to perform all
covenants and obligations of Lender hereunder, including but not limited to
making Advances to Borrower, subject to all of the terms, provisions, and
conditions hereof and of the other Loan Documents. However, neither the
execution of this Agreement or any of the other Loan Documents by Lender nor the
exercise of any rights hereunder or thereunder by Lender shall be construed in
any way as an assumption by Lender of any obligations, responsibilities, or
duties of Borrower arising in connection with the Resort, all or any portion of
the Collateral, under any Timeshare Documents, under any Applicable Laws, or in
connection with any other business of Borrower or the Collateral, nor shall it
otherwise bind Lender to the performance of any obligations with respect to the
Resort, or the Collateral, it being expressly understood that Lender shall not
be obligated to perform, observe, or discharge any obligation, responsibility,
duty, or liability of Borrower with respect to the Resort, any of the
Collateral, under any of the Timeshare Documents, or under any Applicable Laws,
including but not limited to appearing in or defending any action, expending any
money, or incurring any expense in connection therewith. Without limiting the
foregoing, neither this Agreement, any action or actions on the part of Lender
taken hereunder nor the acquisition of the Pledged Notes Receivable, and/or the
other Collateral by Lender prior to or following the occurrence of an Event of
Default shall constitute an assumption by Lender of any obligations of Borrower
with respect to the Resort or such Collateral, or any documents or instruments
executed in connection therewith, and Borrower shall continue to be liable for
all of its obligations thereunder or with respect thereto. Borrower and
Guarantors, jointly and severally, hereby agree to indemnify, protect, defend,
and hold Lender harmless from and against any and all claims, demands, causes of
action, losses, damages, liabilities, suits, costs, and expenses, including,
without limitation, attorneys' fees and court costs, asserted against or
incurred by Lender by reason of, arising out of, or connected in any way with
(a) any failure or alleged failure of Borrower to perform any of its covenants
or obligations with respect to the Resort or all or any portion of the
Collateral; (b) a breach of any certification, representation, warranty, or
covenant of Borrower set forth in any of the Loan Documents; (c) the ownership
of the Pledged Notes Receivable, the other Collateral, and the rights, titles,
and interests assigned hereby, or intended so to be; (d) the debtor-creditor
relationships between Borrower, on the one hand, and the Purchasers or Lender,
as the case may be, on the other; or (e) the Pledged Notes Receivable, or the
management or operation of the Resort. The obligations of Borrower to indemnify,
protect, defend, and hold Lender harmless as provided in this Agreement are
absolute, unconditional, present, and continuing, and shall not be dependent
upon or affected by the genuineness, validity, regularity, or enforceability of
any claim, demand, or suit from which Lender is indemnified. The indemnity
provisions in this Section 9.3 shall survive the complete satisfaction of the
Obligations and the termination of this Agreement and remain binding and
enforceable against Borrower, together with its successors and assigns. Borrower
hereby waives all notices with respect to any losses, damages, liabilities,
suits,
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costs, and expenses, and all other demands whatsoever hereby indemnified, and
agrees that its obligations under this Agreement shall not be affected by any
circumstances, whether or not referred to above, that might otherwise constitute
legal or equitable discharges of its obligations hereunder. If a court of
competent jurisdiction should determine that Borrower is entitled to recover
damages from Lender for any reason or upon any cause, claim, or counterclaim, in
connection with the Loan or the transactions provided for or contemplated
pursuant to this Agreement or the other Loan Documents, Borrower stipulates and
agrees that any such damages or awards shall be limited to compensatory damages
only, and that under no circumstances whatsoever shall Lender be liable to
Borrower, any Guarantor, or any Affiliate thereof for exemplary or punitive
damages, all of which are hereby waived by Borrower and Guarantors.
Notwithstanding the foregoing provisions of this Section 9.3 to the contrary,
Borrower shall not indemnify or hold Lender harmless from and against any
liabilities, claims, demands, losses, damages, costs, or expenses incurred by
Lender solely as a direct result of Lender's own gross negligence or willful
misconduct.
9.4 Right to Defend Action Affecting Security. Lender may, at
Borrower's expense, appear in and defend any action or proceeding, at law or in
equity, that Lender in good faith believes may affect the Liens or security
interests granted under this Agreement, including, without limitation, with
respect to the Pledged Notes Receivable, the Collateral, or Lender's rights
under any of the Loan Documents.
9.5 Expenses. All expenses payable by Borrower under any provision of
this Agreement shall be Obligations of Borrower, and if paid by Lender, shall be
repaid by Borrower to Lender, upon demand, and shall bear interest at the
Default Rate from the date of payment of such expense(s) by Lender until repaid
by Borrower.
9.6 Lender's Right of Set-Off. Lender shall have the right to set-off
against any or all of the Collateral any Obligations then due and unpaid by
Borrower.
9.7 Right of Lender to Extend Time of Payment, Substitute, Release
Security, Etc. Without affecting the liability of any Person for the payment of
any of the Obligations and without affecting or impairing Lender's Lien and
other rights in and to the Collateral, or the remainder thereof, as security for
the full amount of the Loan unpaid and the Obligations, Lender may from time to
time, without notice: (a) release any Person liable for the payment of the Loan;
(b) extend the time or otherwise alter the terms of payment of the Loan; (c)
accept additional security for the Obligations of any kind, including deeds of
trust or mortgages and security agreements; (d) alter, substitute, or release
any property securing the Obligations; (e) realize upon any Collateral for the
payment of all or any portion of the Loan as provided herein in such order and
manner as it may deem fit; and/or (f) join in any subordination or other
agreement affecting this Agreement or the lien or charge thereof.
9.8 Assignment of Lender's Interest. Lender shall have the right to
assign the Loan and all or any portion of its rights in or pursuant to this
Agreement or any of the other Loan Documents to any subsequent holder or holders
of the Mortgage Note and/or the Receivables Note.
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9.9 Notice to Purchaser. Borrower hereby authorizes Lender, Servicing
Agent, and Lockbox Agent (but neither Lender, Servicing Agent, nor Lockbox Agent
shall be obligated) to communicate at any time and from time to time with any
Purchaser or any other Person primarily or secondarily liable under a Pledged
Note Receivable with regard to the Lien of the Lender thereon and any other
matter relating thereto, and by no later than the Closing Date, Borrower shall
deliver to Lender notifications to the Purchasers executed in blank by Borrower
and in form acceptable to Lender, pursuant to which such Purchasers (or other
obligors) are directed to remit all payments in respect of the Collateral to
Lockbox Agent or as Lender may otherwise require.
9.10 Collection of the Notes. Borrower hereby directs and authorizes
each Purchaser and any other Person liable for the payment of any Pledged Note
Receivable, and promptly after the Closing Date, shall direct in writing each
such Person, to pay each installment due thereon directly to Lockbox Agent,
pursuant to the Lockbox Agreement, unless and until directed otherwise by
written notice from Lender or, at Lender's direction, from Borrower, after which
such parties are and shall be directed to make all further payments on the
Pledged Notes Receivable in accordance with the directions of Lender. Following
the occurrence of an Event of Default, Lender shall have the right to require
that all payments becoming due under the Pledged Notes Receivable be paid
directly to Lender, and Lender is hereby authorized to receive, collect, hold,
and apply the same in accordance with the provisions of this Agreement but shall
provide Borrower with accountings of all such activity on at least as frequent a
basis as Lockbox Agent was obligated to provide accountings to Lender and
Borrower, pursuant to the Lockbox Agreement. In the event that following the
occurrence of an Event of Default, Lender or Lockbox Agent does not receive any
installment of principal or interest due and payable under any of the Pledged
Notes Receivable on or prior to the date upon which such installment becomes
due, Lender may, at its election (but without any obligation to do so), give or
cause Lockbox Agent to give notice of such event of default to the defaulting
party or parties, and Lender shall have the right (but not the obligation),
subject to the terms of such instruments, to accelerate payment of the unpaid
balance of any of the Pledged Notes Receivable in default and to enforce any
other remedies available to the holder of such Pledged Notes Receivable,
together with the related Purchase Agreements, with respect to such event of
default. Borrower hereby further authorizes, directs, and empowers Lender (and
Lockbox Agent or any other Person as may be designated by Lender in writing) to
collect and receive all checks and draft evidencing such payments and to endorse
such checks or drafts in the name of Borrower and, upon such endorsements, to
collect and receive the money therefor. The right to endorse checks and draft
granted pursuant to the preceding sentence is irrevocable by Borrower, and the
banks or banks paying such checks or drafts upon such endorsements, as well as
the signers of the same, shall be as fully protected as though the checks or
draft had been endorsed by Borrower.
9.11 Power of Attorney. Borrower does hereby irrevocably constitute and
appoint Lender as Borrower's true and lawful agent and attorney-in-fact, with
full power of substitution, for Borrower and in Borrower's name, place, and
stead, or otherwise, to (a) endorse any checks or drafts payable to Borrower in
the name of Borrower and in favor of Lender as provided in Section 9.10 above;
(b) to demand and receive from time to time any and all property, rights,
titles, interests, and
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Liens hereby sold, assigned, and transferred, or intended so to be, and to give
receipts for same; (c) upon an Event of Default, to collect all rent, revenues,
and income, pursuant to the terms of any Purchase Agreement; (d) from time to
time, to institute and prosecute, in Lender's own name, any and all proceedings
at law, in equity, or otherwise, that Lender may deem proper in order to
collect, assert, or enforce any claim, right, or title, of any kind, in and to
the property, rights, titles, interests, and Liens hereby sold, assigned, or
transferred, or intended so to be, and to defend and compromise any and all
actions, suits, or proceedings in respect of any of the said property, rights,
titles, interests, and Liens; (e) upon an Event of Default, to change Borrower's
post office mailing addresses; and (f) generally to do all and any such acts and
things in relation to the Collateral as Lender shall in good faith deem
advisable, subject to the terms, provisions, and conditions hereof. Borrower
hereby declares that the appointment made and the powers granted pursuant to
this Section 9.11 are coupled with an interest and are and shall be irrevocable
by Borrower in any manner, or for any reason, unless and until a release of the
same is executed by Lender and duly recorded in the Newport Land Evidence
Records.
9.12 Relief from Automatic Stay, Etc. To the fullest extent permitted
by law, in the event that Borrower or any Guarantor shall make application for
or seek relief or protection under the federal bankruptcy code (the "Bankruptcy
Code") or any other Debtor Relief Laws, or in the event that any involuntary
petition is filed against Borrower or any Guarantor under such Code or other
Debtor Relief Laws and not dismissed with prejudice within forty-five (45) days,
the automatic stay provisions of Section 362 of the Bankruptcy Code are hereby
modified as to Lender to the extent necessary to implement the provisions hereof
permitting set-off and the filing of financing statements or other instruments
or documents; and Lender shall automatically and without demand or notice (each
of which is hereby waived by Borrower and Guarantors) be entitled to immediate
relief from any automatic stay imposed by Section 362 of the Bankruptcy Code or
otherwise, on or against the exercise of the rights and remedies otherwise
available to Lender as provided in the Loan Documents.
9.13 Investigations and Inquiries. Borrower and Guarantors hereby
authorize Lender to conduct such investigations and inquiries concerning
Borrower, Guarantors, the Resort, the Purchasers, and the Collateral, as Lender,
in its sole discretion, deems necessary or desirable in connection with its
monitoring of the Loan and the Collateral therefor, and all such Persons of whom
Lender may make such inquiry are empowered to cooperate with, and to provide all
requested information to, Lender.
9.14 Verification of Use. Lender shall be under no duty or obligation
to ascertain the manner in which Borrower has used or will use the proceeds of
the Loan. Lender's sole obligation shall be to advance the proceeds of the Loan
subject to, and in strict accordance with, the terms, provisions, and conditions
of this Agreement and the other Loan Documents. Lender's obligation to fund the
Loan is limited to the principal amount set forth herein and in the Mortgage
Note and the Receivables Note. Borrower is solely responsible for obtaining any
other financing that may be necessary in order to enable them to repay the Loan
on or prior to the Maturity Date. It is expressly
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understood that Lender has no responsibility or obligation whatsoever to provide
to Borrower any further financing, whether in connection with the Resort or
otherwise.
SECTION 10. TERM OF AGREEMENT
This Agreement shall continue in full force and effect, and the Liens
and security interests granted hereby and the duties, covenants, and liabilities
of Borrower hereunder, and all the terms, conditions, and provisions hereof
relating thereto shall continue to be fully operative until all of the
Obligations have been satisfied in full. Borrower expressly agrees that if
Borrower or any Guarantor makes a payment to Lender, which payment or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
or otherwise required to be repaid to a trustee, receiver, or any other party
under any Debtor Relief Laws, state or federal law, common law, or equitable
cause, then to the extent of such repayment, the Obligations or any part thereof
intended to be satisfied and the Liens and security interests provided for
hereunder securing the same shall be revived and continued in full force and
effect as if said payment had not been made.
SECTION 11. MISCELLANEOUS
11.1 Notices. All notices, requests, and other communications to any
party hereunder shall be in writing and shall be given to such party at its
address set forth below or at such other address as such party may hereafter
specify for the purpose of notice to Lender, Borrower, or any Guarantor. Each
such notice, request, or other communication shall be effective (a) if given by
mail, when such notice is deposited in the United States Mail with first class
postage prepaid, and addressed as aforesaid, provided that such mailing is by
registered or certified mail, return receipt requested; (b) if given by
overnight delivery, when deposited with a nationally recognized overnight
delivery service such as Federal Express or Airborne, with all fees and charges
prepaid, addressed as provided below; or (c) if given by any other means, when
delivered at the address specified in this Section 11.1:
If to Borrower: Eastern Resorts Company, LLC
115 Long Wharf
Newport, Rhode Island 02840
Attention: R. Perry Harris
If to Equivest: Equivest Finance, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Lisa M. Henson
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78
If to ERC: Eastern Resorts Corporation
115 Long Wharf
Newport, Rhode Island 02840
Attention: R. Perry Harris
If to Lender: Credit Suisse First Boston Mortgage Capital LLC
11 Madison Avenue
New York City, New York 10010-3629
Attention: Michael C. Szwajkowski, Vice President
11.2 Survival. All representations, warranties, covenants, and
agreements made by Borrower or any Guarantor herein, in the other Loan
Documents, or in any other agreement, document, instrument, or certificate
delivered by or on behalf of Borrower or any Guarantor under or pursuant to the
Loan Documents shall be considered to have been relied upon by Lender and shall
survive the delivery to Lender of such Loan Documents (and each part thereof),
regardless of any investigation made by or on behalf of Lender.
11.3 Governing Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT
AS EXPRESSLY PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUSIVE OF ANY
CHOICE OF LAW PRINCIPLES THAT WOULD RESULT IN A CHOICE OF LAW OTHER THAN THE
LAWS OF SUCH STATE. LENDER, BORROWER, AND GUARANTORS HEREBY CONSENT TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK CITY, NEW
YORK, AND IRREVOCABLY AGREE THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. LENDER, BORROWER, AND GUARANTORS
EXPRESSLY SUBMIT AND CONSENT TO THE JURISDICTION OF THE AFORESAID COURTS AND
WAIVE ANY DEFENSE OF FORUM NON CONVENIENS. BORROWER AND GUARANTORS HEREBY WAIVE
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREE THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE ON THEM BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, ADDRESSED TO EACH OF THEM AT THE ADDRESSES SET FORTH HEREIN, AND
SERVICE SO MADE SHALL BE DEEMED COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN
POSTED.
Borrower's Initial: _______
Guarantors' Initials: _______
11.4 Limitation on Interest. Lender and Borrower intend to comply at
all times with all applicable usury laws. All agreements between Lender and
Borrower, whether now existing or
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hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of demand or acceleration of the maturity of the
Mortgage Note, the Receivables Note, or otherwise, shall the interest contracted
for, charged, received, paid, or agreed to be paid to Lender exceed the highest
lawful rate permissible under applicable usury laws. If, from any circumstance
whatsoever, fulfillment of any provision hereof, of the Mortgage Note, of the
Receivables Note, or of any other Loan Document shall involve transcending the
limit of such validity prescribed by any law which a court of competent
jurisdiction may deem applicable hereto, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if from any
circumstance Lender shall ever receive anything of value deemed interest by
applicable law that would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the outstanding
principal balance of the Loan and not to the payment of interest, or if such
excessive interest exceeds the unpaid principal balance of the Loan, such excess
shall be refunded to Borrower. All interest paid or agreed to be paid to Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full period until payment in full of the
principal so that the interest on the Loan for such full period shall not exceed
the highest lawful rate. Borrower agrees that in determining whether or not any
interest payment under the Loan Documents exceeds the highest lawful rate, any
non-principal payment (except payments specifically described in the Loan
Documents as "interest"), including without limitation, prepayment fees and late
charges, shall, to the maximum extent not prohibited by law, be deemed an
expense, fee, premium, or penalty rather than interest. Lender hereby expressly
disclaims any intent to contract for, charge, or receive interest in an amount
that exceeds the highest lawful rate. The provisions of the Mortgage Note, the
Receivables Note, this Agreement, and all other Loan Documents are hereby
modified to the extent necessary to conform with the limitations and provisions
of this Section, and this Section shall govern over all other provisions in any
document or agreement now or hereafter existing. This Section shall never be
superseded or waived unless there is a written document executed by Lender and
Borrower expressly declaring the usury limitation of this Agreement to be null
and void, and no other method or language shall be effective to supersede or
waive this paragraph.
11.5 Invalid Provisions. If any provision of this Agreement or any of
the other Loan Documents is held to be illegal, invalid, or unenforceable under
present or future laws effective during the term thereof, such provision shall
be fully severable, this Agreement and the other Loan Documents shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof or thereof, and the remaining provisions
hereof or thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom. Any provision of this Agreement or any other Loan Document that is
held to be illegal, invalid, or unenforceable in a particular jurisdiction shall
remain valid and enforceable in all other jurisdictions. Furthermore, in lieu of
any such illegal, invalid, or unenforceable provision, there shall be added
automatically as a part of this Agreement and/or the other Loan Documents (as
the case may be) a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
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11.6 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding upon and inure to the benefit of Borrower,
Guarantors, and Lender and their respective successors and assigns; provided,
however, that neither Borrower nor Guarantors may transfer or assign any of its
rights or obligations under this Agreement, the Commitment Letter, or the other
Loan Documents without the prior written consent of Lender, which consent may be
granted or withheld in Lender's sole and absolute discretion. This Agreement and
the transactions provided for or contemplated hereunder or under any of the
other Loan Documents are intended solely for the benefit of the parties hereto.
No third party shall have any rights or derive any benefits under or with
respect to this Agreement, the Commitment Letter, or the other Loan Documents
except as specifically set forth herein or otherwise provided in a written
document signed by Borrower and Lender. No Person other than Borrower shall have
standing to require satisfaction of such conditions in accordance with their
terms or be entitled to assume that Lender will refuse to make Advances in the
absence of strict compliance with any or all thereof, and no other Person, other
than Borrower, under any circumstances whatsoever, shall be deemed to be a
beneficiary of such conditions, any or all of which Lender may waive, in whole
or in part, at any time if, in its sole discretion, it deems it desirable to do
so. In particular, Lender makes no representation and assumes no obligation as
to third parties concerning the quality of construction of the Improvements or
the absence therefrom of defects. In this connection, Borrower agrees to and
shall indemnify Lender from any liability, claim, or loss, together with
attorneys' fees and costs, resulting from the disbursement of Loan proceeds or
from the condition of the Improvements, whether related to the quality of
construction or otherwise, and whether arising during or after the term of the
Loan. This provision shall survive the repayment of the Loan and continue in
full force and effect so long as the possibility of such liability or claim
exists.
Lender may, in the ordinary course of its business and in accordance
with applicable law, at any time sell or otherwise transfer or assign to one (1)
or more financial institutions or other entities ("Assignees") all or any
portion of its rights hereunder or pursuant to the Mortgage Note, the
Receivables Note, or any or all of the other Loan Documents. Any such assignment
shall be effected by Lender's execution of an assignment in such form as may be
agreed to by the parties thereto and may be accompanied by a release by Lender
of its right, title, and interest hereunder and pursuant to any of the other
Loan Documents in and to all or any portion of the Collateral. Although the
consent of Borrower shall not be required prior to any such assignment's
becoming effective, Lender agrees to provide Borrower with prompt written notice
of any such assignment. In the event of any such assignment by Lender to an
Assignee, Lender's obligations under the Loan Documents shall remain unchanged,
and Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations. The foregoing notwithstanding, Borrower shall
be directly obligated to each Assignee with respect to the Obligations assigned
to such Assignee and shall have no rights of setoff or other remedies against
the Assignee as a consequence of Lender's acts or omissions under this Agreement
subsequent to such assignment.
Upon the consummation of any assignment to an Assignee pursuant to this
Section, Lender and Borrower shall, if Lender or Assignee desires that the
assignment be evidenced in part by one (1)
<PAGE>
81
or more new promissory notes, make appropriate arrangements for such new
promissory note(s) or, as appropriate, one (1) or more replacement promissory
notes to be issued to Lender and for the new promissory note(s) or, as
appropriate, replacement promissory note(s), to be issued to Assignee, in each
case in principal amounts reflecting their respective rights to payment.
11.7 Amendment. This Agreement (including all exhibits and schedules
hereto) may not be amended or modified, and no term, provision, or condition
hereof may be waived, except by a written instrument that is signed by all of
the parties hereto.
11.8 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signature thereto and hereto were on the same instrument. This
Agreement shall become effective upon Lender's receipt of one (1) or more
counterparts hereof signed by Borrower, Guarantors, and Lender.
11.9 Lender Not a Fiduciary. The relationship between Borrower and
Lender is solely that of debtor and creditor, and Lender has no fiduciary or
other special relationship with Borrower or Guarantors, and no term or provision
of any of the Loan Documents shall be construed so as to deem the relationship
between Borrower, Guarantors, and Lender to be other than that of debtor and
creditor.
11.10 Release and Return of Notes Receivable.
(a) In the event that Borrower complies fully with its
Obligations under Section 2.5(b)(ii) of this Agreement with respect to any
Pledged Note Receivable that ceases to be an Eligible Note Receivable, and
Borrower thereafter desires to enforce such ineligible Note Receivable against
the maker thereof, then provided that no Event of Default then exists and no
event has occurred which with notice, the passage of time, or both, would
constitute an Event of Default, within thirty (30) days after its receipt of a
written request from Borrower, Lender shall endorse the ineligible Note
Receivable using the words "Pay to the order of Eastern Resorts Company, LLC,
without recourse," and deliver such ineligible Note Receivable to Borrower.
(b) In the event that all Obligations hereunder are fully
satisfied, then within a reasonable time thereafter not to exceed thirty (30)
days, Lender shall endorse the Pledged Notes Receivable using the words "Pay to
the order of Eastern Resorts Company, LLC, without recourse," and deliver such
Pledged Notes Receivable, together with any other nonrecourse Collateral
reassignment documents requested and prepared by Borrower, at Borrower's sole
cost and expense, free and clear of any Liens or encumbrances by any Person
claiming by, through, or under Lender.
11.11 Accounting Principles. Where the character or amount of any asset
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be determined
<PAGE>
82
or made in accordance with GAAP consistently applied at the time in effect, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
11.12 Entire Agreement. This Agreement and the other Loan Documents,
including the exhibits and schedules to them, comprise the entire agreement
between the parties relating to the subject matter hereof and supersede all
prior agreements and understandings, both oral and written, between the parties
hereto relating to the subject matter hereof (including but not limited to the
Commitment Letter, except as otherwise expressly provided herein), may not be
changed or terminated orally or by course of conduct, and shall be deemed
effective as of the Closing Date.
11.13 Litigation. TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, BORROWER, EACH GUARANTOR, AND LENDER HEREBY
KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE ANY AND ALL RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND OR CLARIFY
ANY RIGHT, POWER, REMEDY, OR DEFENSE ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREIN OR
THEREIN, WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE, OR WITH RESPECT TO
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN),
OR ACTIONS OF ANY PARTY; AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY. BORROWER, EACH GUARANTOR,
AND LENDER FURTHER WAIVE ANY RIGHT TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN
WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY
TRIAL CANNOT OR HAS NOT BEEN WAIVED. FURTHER, BORROWER AND GUARANTORS HEREBY
CERTIFY THAT NO REPRESENTATIVE OR AGENT OF LENDER, INCLUDING LENDER'S COUNSEL,
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF
SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
BORROWER AND GUARANTORS ACKNOWLEDGE THAT THE PROVISIONS OF THIS SECTION ARE A
MATERIAL INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
Borrower's Initials: _______
Guarantors' Initials: _______
The waiver and stipulations of Borrower, Guarantors, and Lender in this
Section 11.13 shall survive the final payment or performance of all of the
Obligations and the resulting termination of this Agreement.
11.14 Incorporation of Exhibits and Schedules. This Agreement, together
with all exhibits and schedules hereto, constitute one (1) document and
agreement that is referred to herein by the use
<PAGE>
83
of the defined term "Agreement. "Such exhibits and schedules are incorporated
herein as though fully set out in this Agreement. The definitions contained in
any part of this Agreement shall apply to all parts of this Agreement.
11.15 Consent to Advertising and Publicity. Borrower hereby consents to
Lender's issuance and dissemination to the public of information describing the
credit accommodation entered into pursuant to this Agreement, consisting of the
names and addresses of Borrower and Guarantors, the Loan's principal amount, and
the Collateral therefor.
11.16 Directly or Indirectly. Where any provision in the Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provisions shall be applicable, whether such action is taken
directly or indirectly by such Person.
11.17 Captions. Section captions have been included in this Agreement
for convenience of reference only and should not be relied upon or used in
interpreting the meaning or intent of any provision hereof.
11.18 Gender. Words of any gender in this Agreement shall include both
genders, where appropriate.
11.19 No Duty. All attorneys, accountants, appraisers, consultants,
custodians, and other professionals retained by Lender in connection with the
Loan shall have the right to act exclusively in the interest of Lender and shall
have no duty of disclosure, duty of loyalty, duty of care, or other duty or
obligation of any kind or nature whatsoever to Borrower, Guarantors, or any
other Person.
11.20 Submissions.
(a) All documents, agreements, reports, surveys, appraisals,
insurance policies, references, financial information, and other submissions
required to be furnished by Borrower or Guarantors to Lender hereunder or
pursuant to any of the other Loan Documents (collectively "Submissions") shall
be in form and content satisfactory to Lender, in its sole discretion, and
prepared at Borrower's sole expense.
(b) Lender shall have the prior right of approval of any
Person responsible for preparing a Submission (a "Preparer") and may reject any
Submission if Lender, in its sole discretion, believes that the experience,
skill, or reputation of the applicable Preparer is unsatisfactory in any respect
whatsoever.
(c) Borrower and Guarantors shall exercise their respective
best efforts to ensure that all reports and appraisals required to be furnished
by Borrower or Guarantors to Lender hereunder or pursuant to any of the other
Loan Documents are specifically addressed to Lender and include the following
statement:
<PAGE>
84
THE UNDERSIGNED ACKNOWLEDGES THAT CREDIT SUISSE FIRST
BOSTON MORTGAGE CAPITAL LLC IS RELYING ON THE WITHIN
INFORMATION IN CONNECTION WITH ITS ADVANCES TO
BORROWER ON THE SUBJECT PROPERTY.
(d) Whether or not expressly stated herein, all consents and
approvals granted by Lender hereunder shall be valid and effective only if
contained in a written document or instrument that has been signed by a duly
authorized representative of Lender.
11.21 Confidentiality. Each party here to acknowledges and agrees that
the material terms hereof and of the other Loan Documents are and shall remain
strictly confidential. No party hereto shall ever disclose the material terms
and provisions hereof without the express prior written consent of the other
parties; provided, however, that the disclosure of the material terms and
provisions of this Agreement to a party's shareholders, officers, directors,
principals, attorneys, accountants, or lenders, or if required by law or
subpoena, shall not constitute a breach of this Section 11.22. The parties
hereto shall take all appropriate measures to prevent the inadvertent or
unintentional disclosure of the material terms and provisions hereof.
11.22 Borrower's Acknowledgment. Borrower acknowledges and agrees that
although Borrower and Lender (or its Affiliates) have discussed and are engaged
in other transactions and relationships between them, including, without
limitation, a public offering of the stock of Equivest and the rendering of a
fairness opinion, Lender is under no obligation to enter into any other
agreement or perform any other services for Borrower except as expressly set
forth in this Agreement. Any other transaction or relationship between Borrower
and Lender (or Lender's Affiliates) shall be evidenced by other documentation,
shall be separate and independent from the Loan, and shall have no effect on
Borrower's obligations to Lender with respect to the Loan or Lender's remedies
under the Loan Documents. Borrower acknowledges and agrees that no discussions
or oral agreements heretofore or hereafter occurring between Borrower and Lender
(or its Affiliates) shall have any legal effect unless embodied in a written
agreement executed by all relevant parties. Furthermore, no other written
agreement between the parties and their Affiliates and the performance of the
parties thereunder shall have any legal effect whatsoever on Borrower's
obligations or Lender's remedies under this Agreement and the other Loan
Documents. All requests for information, business plans, and correspondence
relating to the Loan shall be forwarded to David Arzi and Michael Szwajkowski,
Credit Suisse First Boston Mortgage Capital LLC, 11 Madison Avenue, New York,
New York 10010.
Borrower's Initials: _______
Guarantors' Initials: _______
<PAGE>
85
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<PAGE>
86
IN WITNESS WHEREOF, Borrower, Lender, and Guarantors have
caused this Agreement to by duly executed and delivered effective as of the date
first above written.
Witness: BORROWER:
EASTERN RESORTS COMPANY, LLC, a
Rhode Island limited liability company
By: Eastern Resorts Corporation, a
Delaware corporation, its Managing
Member
By:
- -------------------------------- -------------------------------
Its:
- -------------------------------- -------------------------------
Printed Name
GUARANTORS:
EQUIVEST FINANCE, INC., a Florida
corporation
By:
- -------------------------------- ------------------------------------
Its:
- -------------------------------- ------------------------------------
Printed Name
EASTERN RESORTS CORPORATION, a
Delaware corporation
By:
- -------------------------------- ------------------------------------
Its:
- -------------------------------- ------------------------------------
Printed Name
<PAGE>
87
LENDER:
CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC, a Delaware
limited liability company
By:
- -------------------------------- ------------------------------------
Its:
- -------------------------------- ------------------------------------
Printed Name
<PAGE>
EXHIBIT "A"
CUSTODIAL AGREEMENT
This CUSTODIAL AGREEMENT (the "Agreement") is made and entered
into as of the day of August, 1998, by and among CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC, a Delaware limited liability company ("Lender"), EASTERN
RESORTS COMPANY, LLC, a Rhode Island limited liability company ("Borrower"), and
U.S. Bank National Association, a Minnesota corporation ("Custodian").
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to that certain Loan
and Security Agreement of even date herewith (the "Loan Agreement"), pursuant to
which Lender has agreed to make a loan (the "Loan") to Borrower in the maximum
principal amount of ELEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($11,500,000)
in accordance with the terms, provisions, and conditions of the Loan Agreement
and the other Loan Documents; and
WHEREAS, Lender and Borrower desire that Custodian perform,
and Custodian is willing to perform, the custodial services identified below
with respect to certain Pledged Notes Receivable, Purchase Agreements, and
various related documents and instruments (hereinafter sometimes collectively
referred to as the "Assigned Documents," all upon the terms and conditions set
forth below; and
WHEREAS, the parties hereto desire to enter into this Agreement for the
purpose of setting forth their final and complete understanding with respect to
the services to be performed for Lender by Custodian in connection with the
Assigned Documents.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties, intending to be legally
bound, hereby agree as follows:
1. Definitions. All capitalized terms used but not defined herein shall
have the meanings ascribed to such terms in the Loan Agreement, the provisions
of which are hereby incorporated herein by this reference.
2. Custodial Services.
a. Lender and Borrower hereby appoint Custodian, and Custodian
hereby accepts its appointment, to act exclusively as the agent of Lender for
the purpose of taking custody of the Assigned Documents.
b. From time to time, Borrower shall deliver, or cause to be
delivered, to Custodian, and Custodian shall accept, take custody of, and keep
safely, in segregated fireproof
<PAGE>
2
containment, access to which is limited in a commercially reasonable manner, the
Assigned Documents and all other items listed on Exhibit "A," attached hereto
and incorporated herein by this reference, or otherwise required to be delivered
by Borrower to Custodian, pursuant to the provisions hereof or of the Loan
Agreement or any of the other Loan Documents (hereinafter collectively referred
to as the "Collateral Items").
c. Within two (2) Business Days following Custodian's receipt
of any Collateral Items, Custodian shall deliver to Lender an original written
certification in the form of Exhibit "B," attached hereto and incorporated
herein by this reference, which confirms that Custodian has such Collateral
Items in its possession.
d. On the tenth (10th) day of each calendar month during the
term of this Agreement, Custodian shall furnish Lender with a written report
that specifies all Consumer Loans for which Custodian is holding Collateral
Items pursuant to this Agreement. Each such report shall indicate all Assigned
Documents added to or deleted from the Collateral Items during the previous
calendar month, if any. Custodian shall also execute and deliver to Lender such
other receipts and acknowledgments evidencing delivery and acceptance of the
Assigned Documents as may reasonably be requested.
e. Custodian shall not release any Assigned Documents or other
Collateral Items to any Person unless Custodian shall have first received
Lender's express prior written consent to such release. Lender agrees from time
to time to give its written consent to the release of Assigned Documents and
other Collateral Items to Borrower or any other Person designated in writing by
Borrower upon Lender's receipt of evidence satisfactory to Lender, in its sole
discretion, that the Consumer Loan in question has been paid in full.
f. Custodian shall have no duty or obligation to take any
action to collect any indebtedness evidenced or secured by any of the Assigned
Documents or otherwise to act in respect thereof.
g. Custodian shall promptly notify Borrower and Lender of all
inquiries, demands, and other communications that Custodian receives during the
term of this Agreement in respect of any of the Assigned Documents or Collateral
Items. Custodian shall promptly forward copies of all such written inquiries,
demands, and other communications to Borrower and Lender.
h. In performing its custodial services hereunder, Custodian
shall be, and shall act, solely as the agent of Lender. The authority of
Custodian to act as agent on behalf of Lender hereunder shall be limited to the
specific matters and authority expressly granted to Custodian hereunder.
i. Lender and its authorized agents shall have the right from
time to time to visit the premises of Custodian, during Custodian's normal
business hours, in order to conduct on-site audits, to review Custodian's
procedures, to review the Assigned Documents and other Collateral Items, and to
make notes and copies of the same, and Borrower shall promptly reimburse Lender
for all out-of-pocket costs and expenses reasonably incurred by Lender in
connection with such visits.
j. Custodian shall ensure that an endorsement has been placed
on, or an allonge affixed to, each Note Receivable that constitute an Assigned
Document. Each such endorsement or allonge shall contain the language set forth
in Exhibit "A-1," attached hereto and incorporated herein by this reference.
k. Custodian shall segregate the Assigned Documents and other
Collateral Items from all other documents, instruments, and other items which it
may hold from time to time during the term hereof on behalf of any Person other
than Lender and shall maintain separate accounts with respect thereto.
1. Custodian shall continue to maintain fidelity bond coverage
and errors and omissions insurance coverage on substantially similar terms as
the coverage in effect as of the date hereof.
m. Custodian shall, upon request, deliver (or cause to be
delivered) to Lender, within one hundred twenty (120) days after the end of each
fiscal year of Custodian during the term hereof, its audited financial
statements for such fiscal year.
3. Standard of Care. Custodian agrees to use the same degree of care in
performing custodial services for Lender hereunder that it uses in performing
similar services for its own account.
4. Fees. Borrower will pay Custodian's normal and customary fees for
the custodial services performed by Custodian hereunder as summarized in Exhibit
"C," attached hereto and incorporated herein by this reference, together with
all expenses reasonably incurred by Custodian that are associated with the
performance by Custodian of such custodial services. Any and all fees and
expenses payable in consideration for the performance by Custodian of its
custodial services hereunder shall be the sole obligation of Borrower, and
Lender shall have no liability whatsoever therefor.
5. Termination.
a. This Agreement shall terminate upon the complete
satisfaction and performance of all of Borrower's Obligations under the Loan
Agreement and the other Loan Documents.
<PAGE>
3
b. Notwithstanding any provision of this Agreement to the
contrary, Custodian shall have the right to resign from its duties hereunder
upon not less than ninety (90) days' prior written notice to Lender and
Borrower. Lender shall have the right to terminate this Agreement upon not less
than thirty (30) days' prior written notice to Borrower and Custodian; provided,
however, that Lender may immediately terminate this Agreement by written notice
thereof to Custodian upon any breach by Custodian in the performance of its
custodial services hereunder or upon Custodian's gross negligence or willful
misconduct. Under no circumstances shall Borrower be entitled to terminate this
Agreement or designate a successor to Custodian without the prior written
consent of Lender, which consent Lender may withhold or limit in its sole and
absolute discretion.
c. Within three (3) Business Days following the termination of
this Agreement for any reason, Custodian shall deliver all Assigned Documents
and other Collateral Items to Lender or to such other Person as Lender may
designate in writing and shall cooperate fully and make available to Lender all
services that are commercially reasonable in order to achieve an orderly
transition of servicing responsibilities. Any fees or expenses incurred by
Custodian in the course of such transition shall be borne solely by Borrower;
provided, however, that no fees shall be charged by Custodian or expenses
reimbursed to Custodian if this Agreement has been terminated as a result of the
breach by Custodian in the performance of its custodial services hereunder.
Custodian acknowledges that any failure or delay on its part in the delivery to
Lender or its designee of all Assigned Documents and other Collateral Items upon
a termination hereof will be deemed to cause irreparable injury to Lender not
adequately compensable in damages and for which Lender has no adequate remedy at
law; and accordingly, Custodian agrees that Lender may, in such event, seek and
obtain specific performance or other injunctive relief in any court of competent
jurisdiction.
6. Litigation Involving Collateral Items. In the event that any legal
action or proceeding is initiated relating to any of the Assigned Documents or
other Collateral Items, Custodian shall deliver to Lender (or, if directed in
writing by Lender, to Borrower or Servicing Agent), promptly following receipt
of Lender's written request that such action be taken, such papers related
thereto as Custodian may have in its possession and Lender, in its sole
discretion, deems relevant to such action or proceeding.
7. Indemnification of Custodian. Borrower hereby indemnifies and holds
Custodian harmless from and against any and all loss, cost, expense, liability,
or damage whatsoever, including but not limited to court costs and reasonable
attorneys' fees, that may arise at any time (including any time after Custodian
is no longer acting in such capacity hereunder) directly or indirectly as a
result of any act or omission of Lender, Borrower, or Custodian in connection
with this Agreement, other than Lender's or Custodian's gross negligence or
willful misconduct. Borrower shall, at its sole expense, defend any action or
proceeding instituted against Custodian that relates directly or indirectly to
the subject matter of this Agreement for which Custodian is entitled to be
indemnified pursuant hereto. Notwithstanding the foregoing, Custodian may elect
<PAGE>
4
to provide its own defense in any such action or proceeding, in which case the
costs of such defense shall be borne exclusively by Borrower. The covenants
contained in this paragraph shall survive the termination of this Agreement.
8. Miscellaneous.
a. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term
hereof, such provision shall be fully severable, this Agreement shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance therefrom.
Furthermore, in lieu of such illegal, invalid, or unenforceable provision, there
shall be added automatically as a part of this Agreement a provision as similar
in terms to such illegal, invalid, or unenforceable provision as may be possible
and be legal, valid, and enforceable.
b. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, exclusive of any choice of
law principles that would result in a choice of law other than the laws of the
State of New York.
c. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. This
Agreement shall not be assignable by Borrower or Custodian without the prior
written consent of Lender. Lender may, without the consent of the other parties
to this Agreement, assign its interest in this Agreement, in whole or in part;
and in the event of such an assignment, Lender shall promptly give notice
thereof to Borrower and Custodian.
d. All notices, requests, and other communications to either
party hereunder shall be in writing and shall be given to such party at its
address set forth below or at such other address as such party may hereafter
specify for the purpose of notice to Lender, Borrower, or Custodian. Each such
notice, request, or other communication shall be effective (a) if given by mail,
when such notice is deposited in the United States Mail with first class postage
prepaid, and addressed as aforesaid, provided that such mailing is by registered
or certified mail, return receipt requested; (b) if given by overnight delivery,
when deposited with a nationally recognized overnight delivery service such as
Federal Express or Airborne, with all fees and charges prepaid, addressed as
provided below, or (c) if given by any other means, when delivered at the
address specified in this Section 8.d.:
If to Borrower: Eastern Resorts Company, LLC
115 Long Wharf
Newport, Rhode Island 02840
Attention: R. Perry Harris
<PAGE>
5
With copy to: Equivest Finance, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Lisa M. Henson
If to Lender: Credit Suisse First Boston Mortgage Capital LLC
11 Madison Avenue
New York City, New York 10010-3629
Attention: Michael C. Szwajkowski, Vice President
If to Custodian: U.S. Bank National Association
180 East 5th Street
St. Paul, Minnesota 55101
Attention: Beth A. Mewaldt, Vice President
e. This Agreement (including but not limited to the exhibits
hereto) may not be modified or amended, and no term, provision, or condition
hereof may be waived, except by a written instrument signed by all of the
parties hereto.
f. This Agreement may be executed in counterparts, each of
which shall be deemed an original document but all of which, collectively, shall
constitute a single document.
g. Borrower agrees to pay all costs and expenses reasonably
incurred by Lender in connection with the evaluation, protection, assertion, and
enforcement of Lender's rights hereunder, including, without limitation, court
costs, audit expenses, collection charges, and attorneys' and paralegals' fees
and disbursements.
h. This Agreement has been duly executed and delivered by
Custodian, Borrower, and Lender and constitutes a legal, valid, and binding
obligation of each such party, enforceable in accordance with its terms.
i. BORROWER, CUSTODIAN, AND LENDER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY
PARTY. BORROWER, CUSTODIAN, AND LENDER FURTHER WAIVE ANY RIGHT THEY MAY HAVE TO
SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN WHICH A JURY TRIAL HAS BEEN WAIVED
WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL CANNOT
<PAGE>
6
OR HAS NOT BEEN WAIVED. FURTHER, BORROWER AND CUSTODIAN HEREBY CERTIFY THAT NO
REPRESENTATIVE OR AGENT OF LENDER, INCLUDING LENDER'S COUNSEL, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION,
SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. BORROWER
ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT TO
LENDER'S ACCEPTANCE OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Borrower's Initials: _______
Custodian's Initials: _______
<PAGE>
7
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf by persons thereunto duly authorized
as of the day and year first written above.
Witnesses: BORROWER:
EASTERN RESORTS COMPANY, LLC, a
Rhode Island limited liability company
By: Eastern Resorts Corporation, a Delaware
corporation, its Managing Member
By:
- ------------------------------- ---------------------------------
Its:
- ------------------------------- ---------------------------------
Printed Name
CUSTODIAN:
U.S. Bank National Association, a
Minnesota corporation
By:
- ------------------------------- -------------------------------------
Its:
- ------------------------------- -------------------------------------
Printed Name
LENDER:
CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC, a Delaware
limited liability company
By:
- ------------------------------- -------------------------------------
Its:
- ------------------------------- -------------------------------------
Printed Name
<PAGE>
EXHIBIT "A"
Collateral Items
A. ITEMS WHICH MUST BE ORIGINALS AT TIME OF THEIR INITIAL DELIVERY
TO CUSTODIAN
1. Notes Receivable consisting of Interval Interest Promissory
Notes, together with the allonge in the form of Exhibit "A-l,"
attached hereto and incorporated herein by this reference; and
2. The Purchase and Sale Agreements that relate to each Note
Receivable delivered to Custodian, including any addenda
thereto.
B. ADDITIONAL ITEMS WHICH MUST ACCOMPANY THE ITEMS DELIVERED TO
CUSTODIAN PURSUANT TO SECTION A OF THIS EXHIBIT A
1. Originals or true copies of the truth-in-lending disclosure
statements that relate to each Interval Interest Promissory
Note and Purchase and Sale Agreement delivered to Custodian;
and
2. To the extent required by Lender to be delivered to Custodian,
true copies of all loan applications, Purchaser's or owner's
acknowledgments and understandings, public offering statement
receipts, Payment Authorization Agreements, certificates of
title, and Exchange Company applications and disclosures.
<PAGE>
EXHIBIT "A-1"
ALLONGE TO INTERVAL INTEREST PROMISSORY NOTE
This Allonge is made with respect to and is intended to be
affixed to that certain Interval Interest Promissory Note dated ________
made by _______________________________________________________________________
to the order of Eastern Resorts Company, LLC, a Rhode Island limited liability
company, in the original principal amount of $ . The undersigned hereby executes
this Allonge with the intention that such act constitute an endorsement of the
aforedescribed Interval Interest Promissory Note in favor of the applicable
endorsee.
_______________________________________________________________________________
Pay to the order of Resort Funding, Inc., without recourse.
CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC, a Delaware limited liability company
By:
----------------------------------
Its:
----------------------------------
Pay to the order of Eastern Resorts Company, LLC, without recourse.
RESORT FUNDING, INC., a Delaware corporation
By:
----------------------------------
Its:
----------------------------------
Pay to the order of Credit Suisse First Boston Mortgage
Capital, LLC, its successors and assigns, with recourse.
EASTERN RESORTS COMPANY, LLC, a Rhode
Island limited liability company
By: Eastern Resorts Corporation, a Delaware
corporation, its Managing member
By:
-----------------------------------
R. Perry Harris, President
<PAGE>
EXHIBIT "B"
TO: Credit Suisse First Boston Mortgage Capital LLC
RE: Custodial Agreement dated as of August 24, 1998, by and
between Credit Suisse First Boston Mortgage Capital LLC,
Eastern Resorts Company, LLC, and U.S. Bank National
Association ("Custodian") (the "Custodial Agreement")
DATE:
In accordance with the provision of Section 2.c. of the
Custodial Agreement and the terms, provisions, and conditions of that certain
Loan and Security Agreement dated as of August 24, 1998, by and among Credit
Suisse First Boston Mortgage Capital LLC, Eastern Resorts Company, LLC, Equivest
Finance, Inc., and Eastern Resorts Corporation, the undersigned, as Custodian,
hereby certifies that:
1. It has in its possession each of the original Notes
Receivable listed on Schedule 1 hereto, together with all other documents,
instruments, and other items related thereto as described in Exhibit "A" to the
Custodial Agreement;
2. Such Collateral Items have been reviewed and, in
Custodian's good faith judgment, appear regular on their face;
3. Based on its examination of the subject Collateral Items,
the information set forth in Schedule 1 is correct in all material respects; and
4. Each Note Receivable in Custodian's possession has been
endorsed in the manner prescribed in Exhibit "A-1" to the Custodial Agreement.
Custodian hereby confirms that it is holding each such
Collateral Item as bailee and custodian for the exclusive use and benefit of
Lender pursuant to the terms, provisions, and conditions of the Custodial
Agreement. No Person other than Lender may rely or shall be entitled to rely on
this Certification.
All capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Custodial Agreement or the Loan Agreement, as
appropriate, the provisions of each of which are incorporated herein by this
reference.
U.S. BANK NATIONAL ASSOCIATION
By:
--------------------------------
Its:
--------------------------------
<PAGE>
SCHEDULE 1
NOTES RECEIVABLE
Dated: _____________________
<TABLE>
<CAPTION>
ORIGINAL
NUMBER OF ORIGINAL MONTHLY MONTHLY
NAME OF IDENTIFYING MONTHS TO PRINCIPAL INTEREST PAYMENT DATE/ PAYMENT
BORROWER NUMBER MATURITY BALANCE RATE MATURITY DATE AMOUNT
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT "B"
PLEDGE AND ASSIGNMENT OF NOTES
RECEIVABLE AND PURCHASE AGREEMENTS
This PLEDGE AND ASSIGNMENT OF NOTES RECEIVABLE AND PURCHASE
AGREEMENTS (the "Collateral Assignment") is made this day of August, 1998, by
EASTERN RESORTS COMPANY, LLC, a Rhode Island limited liability company
("Assignor"), the address of which is 115 Long Wharf, Newport, Rhode Island
02840, to and in favor of CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a
Delaware corporation, the address of which is 11 Madison Avenue, New York City,
New York 10010 ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor and Assignee are parties to that certain Loan and
Security Agreement of even date herewith (the "Loan Agreement"), pursuant to
which Assignee has agreed to make a loan to Assignor in the maximum principal
amount of Eleven Million Five Hundred Thousand Dollars ($11,500,000) (the
"Loan"); and
WHEREAS, as a portion of the Collateral for the Loan, Assignor has
agreed to pledge and collaterally assign unto Assignee all of Assignor's right,
title, and interest in and to certain Notes Receivable, Purchase Agreements, and
the Liens and security interests created thereby, all as more particularly
described in Schedule "A," attached hereto and incorporated herein by this
reference.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged by Assignor, Assignor, intending to be legally bound, hereby
covenants and agrees with Assignee as follows:
1. Unless otherwise expressly provided herein to the contrary or unless
the context otherwise requires, all capitalized terms used herein shall have the
meanings ascribed to them in the Loan Agreement, the provisions of which are
hereby incorporated herein by this reference.
2. Assignor has collaterally assigned, pledged, and granted and, for
value received, does hereby collaterally assign, pledge, and grant to and in
favor of Assignee a Lien and continuing security interest in and to all of
Assignor's right, title, and interest in and to the Notes Receivable and
Purchase Agreements described in Schedule "A" hereto consisting of certain
Purchase and Sale Agreements and Interval Interest Promissory Notes, together
with all other Collateral appurtenant thereto, connected therewith, or
substituted or replaced therefor, and all cash and non-cash proceeds thereof and
profits derived therefrom (hereinafter sometimes collectively referred as the
"Assigned Collateral").
3. This Collateral Assignment is executed and delivered by Assignor in
favor of Assignee pursuant to the Loan Agreement. Upon and after an Event of
Default thereunder, Assignee shall have
<PAGE>
2
all the rights and remedies provided for hereunder, pursuant to the Loan
Agreement, and by applicable law.
4. Assignor hereby represents and warrants to Assignee, and covenants
and agrees with Assignee, that:
(a) Assignor holds and, for so long as the Obligations or any
portion thereof remain unsatisfied, shall retain, good and marketable title to
all Assigned Collateral, free and clear of any Lien, security interest, charge,
or encumbrance except for the Permitted Liens and Encumbrances and those Liens
created by this Collateral Assignment or any other Loan Document or otherwise in
favor of Assignee.
(b) By virtue of this Collateral Assignment, the recordation
hereof and of a corresponding UCC-1 financing statement in the Newport Land
Evidence Records, and the filing of a corresponding UCC-1 financing statement
with the Rhode Island Secretary of State, Assignee will own and hold a valid and
perfected continuing first priority Lien and security interest in and to the
Notes Receivable and Purchase Agreements described in Schedule "A" hereto,
together with all other Assigned Collateral.
(c) The rights hereby conveyed to Assignee by Assignor are not
and shall not be subject or subordinate to the rights of any other Person;
provided, however, that pursuant to the Loan Documents, Assignee may, in its
sole discretion, sell or otherwise transfer or assign to any Person Assignee's
right, title, or interest in and to all or any portion of the Assigned
Collateral.
(d) Assignor has full right, power, and authority to assign,
pledge, and grant to Assignee a Lien and continuing first priority security
interest in and to the subject Notes Receivable, Purchase Agreements, and other
Assigned Collateral, and the grant, pledge, and assignment thereof does not and
will not violate or result in a breach, default, or violation (with the giving
of notice, the passage of time, or otherwise) under the subject Notes Receivable
or Purchase Agreements, any Timeshare Document, or any Applicable Laws.
(e) Each of the Notes Receivable and Purchase Agreements
described in Schedule "A" hereto arises from the bona fide sale by an Assignor
of an Interval in a Unit at the Resort, consummated in accordance with the
Timeshare Documents and all Applicable Laws, and each such Note Receivable is an
Eligible Note Receivable.
(f) To the best of Assignor's knowledge after good faith
diligent inquiry: (i) none of the subject Notes Receivable or Purchase
Agreements are forged or have affixed thereto any unauthorized signatures or
have been entered into by any Person who does not possess the requisite legal
capacity; (ii) the subject Notes Receivable and Purchase Agreements are in full
force and effect and constitute valid and legally enforceable obligations of the
applicable Purchasers or other obligors; (iii) none of the applicable Purchasers
or other obligors have any defense, offset, claim, or
<PAGE>
3
counterclaim relating to the subject Notes Receivable, Purchase Agreements, or
any related documents or instruments; and (iv) there is no default or event
which, with the passage of time or the giving of notice, would give rise to a
default thereunder by any applicable Purchaser or other obligor as of the date
hereof.
(g) Assignor has not assigned, pledged, or granted and, for so
long as the Obligations or any portion thereof remain unsatisfied, will not
assign, pledge, or grant any of their right, title, or interest in or to the
subject Notes Receivable, Purchase Agreements, or any other Assigned Collateral
except in favor of Assignee, and Assignor agrees that any purported assignment,
pledge, or grant of any of such Assigned Collateral shall be null and void and
of no legal effect whatsoever.
(h) Assignor has not and, for so long as the Obligations or
any portion thereof remain unsatisfied, will not, without Assignee's prior
written consent, cause or permit any amendment, modification, extension, or
termination (other than by payment in full) of the subject Notes Receivable or
Purchase Agreements without the prior written consent of Assignee, nor will
Assignor waive, excuse, condone, forgive, or in any manner release or discharge
any material obligations, covenants, warranties, conditions, or agreements to be
performed by the applicable Purchasers or other obligors under the such Notes
Receivable, Purchase Agreements, or any related documents or instruments without
the prior written consent of Assignee, and Assignor agrees that any such
purported act without such consent shall be null and void and of no legal effect
whatsoever.
(i) This Collateral Assignment has been duly authorized,
executed, and delivered by Assignor and constitutes the legal, valid, and
binding obligation of Assignor, enforceable against Assignor in accordance with
its terms.
5. This Collateral Assignment is executed and delivered only for the
purpose of providing collateral security for the Obligations and shall not
constitute or be interpreted as an absolute assignment of Assignor's rights or
obligations under the subject Notes Receivable or Purchase Agreements. Neither
the execution, delivery, nor recordation of this Collateral Assignment shall
render Assignee liable in any manner whatsoever for any obligations, duties, or
liabilities of any Assignor pursuant to the subject Notes Receivable, Purchase
Agreements, any related documents or instruments, or any Timeshare Documents.
Assignor hereby expressly acknowledges that Assignee has not assumed any of the
obligations, duties, or liabilities of Assignor under or with respect to any of
the Assigned Collateral. Assignee shall not be required to make any inquiry as
to the nature or sufficiency of any payment received by it, to present or file
any claim, or to take any other action to collect or enforce the payment of any
amounts that may have been assigned to it or the performance of any obligations
to which it may be entitled hereunder.
6. Assignor covenants and agrees that it will give Assignee prompt
written notice of any notice that Assignor receives under or in respect of any
Note Receivable or Purchase Agreement, including but not limited to any notices
of default.
<PAGE>
4
7. Assignor hereby irrevocably authorizes Assignee, at Assignor's sole
cost and expense, to file without Assignor's signatures such financing and
continuation statements relating to the Collateral Assignment, and to deliver
such notifications or certifications, as Assignee, in its sole discretion, deems
reasonably necessary or appropriate in order to protect its right, title, and
interest in and to the Assigned Collateral; and Assignor hereby appoints
Assignee as Assignor's true and lawful attorney-in-fact to execute any such
statements in Assignor's name and to perform all other acts that Assignee, in
its sole discretion, deems reasonably necessary or appropriate in order to
perfect and continue, and realize upon, the Liens and security interests
conferred pursuant to this Collateral Assignment and the other Loan Documents.
8. Assignor agrees that at any time and from time to time, promptly
upon the reasonable request of Assignee or any successor or assign thereof, it
will execute and deliver such further documents and instruments and perform such
further acts as Assignee (or its successor or assign) may reasonably request in
order to effectuate the purposes and intent of this Collateral Assignment.
9. Upon an Event of Default, or if a default shall occur with respect
to any of the Assigned Collateral, then, in addition to (and not in limitation
of) all other rights and remedies available to Assignee, Assignee may, without
obligation to do so, and without releasing Assignor from any of its liabilities
and obligations hereunder or pursuant to any of the other Loan Documents or the
Timeshare Documents, take such action as Assignee deems reasonably necessary or
appropriate to protect its interests, rights, and powers hereunder and under the
other Loan Documents, including, without limitation, amending or terminating any
of the subject Notes Receivable and/or Purchase Agreements and/or granting
waivers thereunder, all without notice to or the consent or approval of
Assignor. Assignee may further appear in and defend any action, suit, or
proceeding purporting to affect its interests, rights, and powers under any of
the Loan Documents and perform and discharge each and every obligation,
covenant, and agreement of Assignor contained herein or in the subject Notes
Receivable and/or Purchase Agreements; and in exercising such powers, Assignee
may, at Assignor's sole cost and expense, pay any or all reasonably necessary
costs and expenses, employ counsel, and incur and pay reasonable attorneys' fees
and expenses. Assignor hereby indemnifies and holds Assignee harmless with
respect to, and agrees to reimburse Assignee for, such costs, expenses, and
fees, and Assignor's obligations with respect thereto shall be included among
the Obligations, shall bear interest at the Applicable Default Rate, and shall
be secured by the Collateral. The foregoing indemnification obligation shall
survive the complete satisfaction of the Obligations and the termination of this
Collateral Assignment.
10. Upon the complete and final discharge and satisfaction of all of
the Obligations, all rights herein assigned to Assignee shall cease and
terminate and Assignee shall, at Assignor's sole cost and expense, execute and
deliver to Assignor such documents, instruments, and termination statements as
Assignor may reasonably request in order to evidence the termination of
Assignee's rights hereunder.
<PAGE>
5
11. This Collateral Assignment shall be binding on Assignor and its
successors and assigns and inure to the benefit of Assignee and its successors,
assigns, and participants, if any. Assignee shall have the right to sell or
otherwise transfer or assign to any Person, from time to time, all or any
portion of the Assigned Collateral and Assignee's rights and interests hereunder
and thereunder; provided, however, that Assignee shall provide Assignor with
prompt written notice of any such transfer or assignment. The terms and
provisions of this Collateral Assignment may not be terminated or modified or
amended orally or by course of conduct or dealing or in any manner except in a
writing that is signed by the party against whom enforcement is sought.
12. THIS COLLATERAL ASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, EXCLUSIVE OF ANY CHOICE OF LAW PROVISIONS
THAT WOULD RESULT IN A CHOICE OF LAW OTHER THAN THE LAWS OF SUCH STATE. ASSIGNOR
HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
NEW YORK CITY, NEW YORK, AND IRREVOCABLY AGREES THAT, SUBJECT TO ASSIGNEE'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
COLLATERAL ASSIGNMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH
COURTS. ASSIGNOR EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. ASSIGNOR HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE
OF PROCESS MAY BE MADE ON ASSIGNOR BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO ASSIGNOR AT THE ADDRESS SET FORTH IN THE LOAN
AGREEMENT, AND SERVICE SO MADE SHALL BE DEEMED COMPLETE TEN (10) DAYS AFTER THE
SAME HAS BEEN POSTED.
Assignor's Initials:_____
13. Assignor hereby acknowledges that this Collateral Assignment will
be recorded in the Newport Land Evidence Records and agrees to pay any and all
recording costs and taxes of whatever type, including but not limited to
documentary stamp and intangible taxes, that may be payable from time to time
with respect to this Collateral Assignment, its recordation, any amendments to
this Collateral Assignment and their recordation, the recordation of a
corresponding UCC-1 financing statement in the Newport Land Evidence Records,
and the filing of a corresponding UCC-1 financing statement with the Rhode
Island Secretary of State, or the other Assigned Collateral, excluding income
and profit-based taxes.
14. If any provision of this Collateral Assignment is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable, this Collateral
Assignment shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof, and the remaining
provisions of this Collateral Assignment shall remain in full force and effect
and shall not be affected by the illegal,
<PAGE>
6
invalid, or unenforceable provision or by its severance therefrom. In any suit,
action, or proceeding arising out of or in connection with this Collateral
Assignment, Assignee shall be entitled to reasonable attorneys' and paralegals'
fees and expenses, whether such fees and expenses arise before such proceedings
are commenced or after the entry of a final judgment and whether suit be brought
or not. Any right or remedy granted herein or in any other Loan Document is
separate, distinct, and cumulative and not exclusive of any other right or
remedy granted herein, therein, or provided by law or in equity; and all of the
same may be exercised concurrently, independently, or successively by Assignee,
in its sole discretion. Any forbearance on the part of Assignee in exercising
any right or remedy hereunder shall not constitute a waiver of or preclude the
exercise of such right or remedy in the future. Assignee shall not be deemed by
any act or omission to have waived any right or remedy or any Default or Event
of Default unless such waiver is in writing and signed by Assignee, and then
only to the extent specifically set forth in such writing.
15. Assignee may take or release other security for the payment and
performance of the Obligations, may release any party primarily or secondarily
liable therefor, including but not limited to any Guarantor, and may apply any
other security held by it to the satisfaction of such Obligations, without
prejudice to any of its rights under this Collateral Assignment. Nothing
contained in this Collateral Assignment and no act done or omitted by Assignee
pursuant to the powers and rights granted to it hereunder shall be deemed to
constitute a waiver by Assignee of its rights and remedies pursuant to this
Collateral Assignment or the other Loan Documents, and this Collateral
Assignment is made and accepted without prejudice to any of the rights and
remedies possessed by Assignee pursuant to the terms, provisions, and conditions
hereof and of the other Loan Documents.
16. To the fullest extent permitted by law, in the event that Assignor
shall make application for or seek relief or protection under the federal
bankruptcy code (the "Bankruptcy Code") or any other Debtor Relief Laws, or in
the event that any involuntary petition is filed against Assignor under such
Bankruptcy Code or other Debtor Relief Laws and not dismissed with prejudice
within forty-five (45) days of its filing, then the automatic stay provisions of
Section 362 of the Bankruptcy Code are hereby modified as to Assignee to the
extent necessary to implement the provisions hereof permitting set-off and the
filing of financing statements or other instruments or documents; and Assignee
shall automatically and without demand or notice (each of which is hereby waived
by Assignor) be entitled to immediate relief from any automatic stay imposed by
Section 362 of the Bankruptcy Code or otherwise, on or against the exercise of
the rights and remedies otherwise available to Assignee as provided in the Loan
Documents. In addition, in the event that relief is sought by or against
Assignor under the Bankruptcy Code, such Assignor agrees not to seek, directly
or indirectly, in any ensuing bankruptcy proceeding, any extension of the
exclusivity period otherwise available to a debtor under the Bankruptcy Code,
including without limitation, the exclusivity period provided for under Section
1121(b) of the Bankruptcy Code.
17. TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT
BE WAIVED, ASSIGNOR HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY
<PAGE>
7
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND OR CLARIFY ANY RIGHT,
POWER, REMEDY, OR DEFENSE ARISING OUT OF OR RELATED TO THIS COLLATERAL
ASSIGNMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREIN OR
THEREIN, WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE, OR WITH RESPECT TO
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN),
OR ACTIONS OF ANY PARTY; AND ASSIGNOR AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY. ASSIGNORS FURTHER WAIVE ANY
RIGHT TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN WHICH A JURY TRIAL HAS BEEN
WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN
WAIVED. FURTHER, ASSIGNOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
ASSIGNEE, INCLUDING ASSIGNEE'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT ASSIGNEE WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO JURY TRIAL PROVISION. ASSIGNOR ACKNOWLEDGES THAT THE
PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT TO ASSIGNEE'S AGREEMENT TO
MAKE THE LOAN TO ASSIGNOR.
Assignor's Initials:____
<PAGE>
8
IN WITNESS WHEREOF, Assignor has caused this Collateral Assignment to
be duly executed as of the date first written above.
ASSIGNOR:
EASTERN RESORTS COMPANY, LLC,
a Rhode Island limited liability company
By: Eastern Resorts Corporation, a Delaware
corporation, its Managing Member
By:
----------------------------------
Its:
----------------------------------
STATE OF _________________)
)
COUNTY OF ________________)
The foregoing instrument was acknowledged before me this ______ day of
August, 1998, by _________________________________, as __________________ of
Eastern Resorts Corporation, the Managing Member of Eastern Resorts Company,
LLC, a Rhode Island limited liability company, on behalf of said company.
-------------------------------
Notary Public
My Commission Expires:
- ----------------------
<PAGE>
SCHEDULE "A"
Notes Receivable and Purchase Agreements
<PAGE>
EXHIBIT "C"
LOCKBOX AGREEMENT
This LOCKBOX AGREEMENT (the "Lockbox Agreement") is made and entered
into as of the day of August, 1998, by and among CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC, a Delaware limited liability company ("Lender"), EASTERN
RESORTS COMPANY, LLC, a Rhode Island limited liability company ("Borrower"), and
BANK OF AMERICA, a California corporation doing business as SEAFIRST BANK
("Lockbox Agent").
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to that certain Loan and
Security Agreement of even date herewith (the "Loan Agreement"), pursuant to
which Lender has agreed to make a loan (the "Loan") to Borrower in the maximum
principal amount of ELEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($11,500,000);
and
WHEREAS, the Receivables Component of the Loan is evidenced in part by
that certain Receivables Promissory Note of even date herewith made by Borrower
to the order of Lender in the original principal amount of FIVE MILLION DOLLARS
($5,000,000) (the "Note"); and
WHEREAS, Borrower has agreed to secure the Receivables Component of the
Loan and the other Obligations by, among other things, granting to Lender a
continuing first priority Lien and security interest in and to all of Borrower's
right, title, and interest in and to certain Pledged Notes Receivable and
related Purchase Agreements, together with the proceeds thereof (all of the
foregoing assets and collateral, including all additions thereto and
replacements and substitutions therefor, and all proceeds thereof, are sometimes
collectively referred to herein as the "Lockbox Collateral"); and
WHEREAS, in connection with the Receivables Component of the Loan,
Borrower has agreed to establish a lockbox arrangement, pursuant to which
Lockbox Agent, as Lender's exclusive agent, shall receive all payments made in
respect of the Lockbox Collateral and disburse the same to Lender, pursuant to
the terms, provisions, and conditions of the Loan Agreement and the other Loan
Documents.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties, intending to be legally
bound, hereby agree as follows:
1. Definitions. All capitalized terms used but not defined herein shall
have the meanings ascribed to them in the Loan Agreement, the provisions of
which are hereby incorporated herein by reference.
2. Appointment of Lockbox Agent. Lender hereby appoints Lockbox Agent
as Lender's exclusive agent and custodian with respect to the Lockbox
Collateral, the Lockbox, and the Lockbox
<PAGE>
2
Account (as such terms are defined below), and Lockbox Agent hereby accepts such
appointment. The agency and authority of Lockbox Agent shall be limited solely
to the specific matters and authorizations expressly granted to Lockbox Agent
hereunder.
3. Establishment of Lockbox and Account.
a. Borrower shall establish (i) a United States Postal Service
post office box or other mail receipt and lockbox arrangement acceptable to
Lender (the "Lockbox"), access to which shall be restricted to Lender and
Lockbox Agent; and (ii) a bank account in the exclusive name of Lender, at the
office of Lockbox Agent located at 802 "A" Street, Tacoma, Washington 98402, as
described in Schedule "A," attached hereto and incorporated herein by this
reference (the "Lockbox Account").
b. Lender shall be the sole owner of the Lockbox and the
Lockbox Account, and Lockbox Agent shall permit no other Person to own or claim
any interest in the Lockbox or the Lockbox Account. The signature cards and
related records with respect to the Lockbox and the Lockbox Account shall be in
the name of Lender and shall bear the notation "Credit Suisse First Boston
Mortgage Capital LLC Timeshare Hypothecation Lockbox Account--Long Wharf
Resort." Lockbox Agent's and Borrower's books and records shall at all times
reflect Lender's exclusive interest in the Lockbox Collateral, including all
proceeds thereof, from time to time deposited in, credited to, or disbursed
from, the Lockbox Account.
c. All Instruments of Payment (as such term is defined below)
and other proceeds relating to the Lockbox Collateral are and, until all of
Borrower's Obligations, pursuant to the Loan Agreement and the other Loan
Documents, have been fully satisfied, shall remain, the sole and exclusive
property of Lender and, during the term of this Lockbox Agreement, shall be held
by Lockbox Agent for Lender until disbursed to Lender or returned to Borrower,
pursuant to the terms, provisions, and conditions hereof and of the Loan
Agreement. Lockbox Agent shall not release to Borrower or to any other Person,
including itself, any of the Lockbox Collateral, including but not limited to
any Instruments of Payment, other proceeds, or amounts from time to time on
deposit in the Lockbox Account or which Lockbox Agent shall otherwise receive,
pursuant to the terms of this Lockbox Agreement.
d. During the term of this Lockbox Agreement, Lockbox Agent
shall have unrestricted access to the Lockbox and the Lockbox Account and shall
have complete and exclusive authority to receive, open, and administer, in
accordance with the terms, provisions, and conditions hereof, all Instruments of
Payment, Lockbox Collateral proceeds, and mail addressed to the Lockbox or
otherwise received by Lockbox Agent, pursuant to the terms, provisions, and
conditions hereof, whether by regular, registered, certified, or insured mail,
wire transfer, or otherwise. Except for the authority expressly granted to
Lockbox Agent hereunder with respect to the Lockbox, neither Lockbox Agent nor
Borrower (nor any Person claiming through either of them) shall have any
interest in or control over the Lockbox or any of the Lockbox Collateral, the
Lockbox Account, or
<PAGE>
3
any Instruments of Payment or other proceeds, or any mail or other materials
received in the Lockbox or otherwise received by Lockbox Agent.
e. Lockbox Agent shall not be entitled to deduct from the
Lockbox Account any of its fees or expenses which become due from time to time
pursuant to this Lockbox Agreement, except as otherwise expressly provided in
Section 9 below. Except as otherwise provided in said Section 9, Lockbox Agent
hereby irrevocably waives any and all rights to setoff, deduction, recoupment,
attachment, garnishment, or otherwise, on account of any indebtedness owing to
it by Borrower or any claims arising from or related to this Lockbox Agreement,
against any amounts in the Lockbox, deposited in the Lockbox Account, or
otherwise received or held from time to time by Lockbox Agent, pursuant to this
Lockbox Agreement.
4. Payments to Lockbox Account. Prior to the date hereof, Borrower
shall have directed or otherwise caused the makers of each Note Receivable, in
writing, to pay directly to Lockbox Agent all interest, principal, prepayments
(both voluntary and mandatory), and other amounts of any and every description
payable to Borrower by or on behalf of such maker pursuant to the applicable
Note Receivable, the related Purchase Agreement, or any other related documents
or instruments. Such amounts shall be deposited by Lockbox Agent into the
Lockbox Account. Borrower shall immediately pay any and all amounts paid to or
otherwise received from time to time by Borrower in connection with a Consumer
Loan, including but not limited to any amounts received by a Borrower upon its
realization upon any collateral for a Consumer Loan (which amounts shall be
deemed received in trust for the sole and exclusive benefit of Lender), to
Lockbox Agent, as and when such amounts are received by Borrower (and in the
form so received, properly endorsed to Lockbox Agent, if appropriate).
Notwithstanding the foregoing provisions of this Section 4 or any other
provision of this Lockbox Agreement to the contrary: (a) by written notice from
Lender or from Borrower, at Lender's direction, the Purchasers and other
obligors under the Pledged Notes Receivable may be directed to make all further
payments in respect thereof in accordance with such written directions; and (b)
following any Default or Event of Default, pursuant to the Loan Agreement or any
of the other Loan Documents, Lender shall have the right to require that all
payments of any and every kind becoming due under the Pledged Notes Receivable
be paid directly to Lender and to terminate this Lockbox Agreement in accordance
with the provisions of Section 10 hereof.
5. Lockbox Services and Procedures. Not less frequently than each
Business Day, Lockbox Agent shall:
a. Collect, open, remove, and inspect the contents of all mail
and other documents and instruments delivered to the Lockbox or otherwise to
Lockbox Agent pursuant to this Lockbox Agreement, including, without limitation,
all cash, checks, drafts, money orders, notes, bills, and other instruments
providing for the payment of money (hereinafter collectively referred to as
"Instruments of Payment");
<PAGE>
4
b. Endorse, without recourse to Lender, and otherwise in
accordance with Lockbox Agent's general procedures for presentment and
collection of negotiable and non-negotiable instruments, all non-cash
Instruments of Payment with respect to which the payee or endorsee is Borrower
(or a reasonable variation of Borrower); and
c. Deposit into the Lockbox Account the total dollar amount
represented by all depositable Instruments of Payment received by Lockbox Agent
in respect of the Lockbox Collateral.
By no later than 5:00 p.m. New York time on each Friday prior to the
Maturity Date, Lockbox Agent shall remit, via federal funds wire transfer or
electronic funds transfer, all immediately available funds then deposited in the
Lockbox Account to Lender, for credit to the account of Credit Suisse First
Boston Mortgage Capital LLC, at __________________________________________
____________________________________________________________________________,
or as may otherwise be directed by Lender in writing.
6. Remittance Collection. Any non-cash Instrument of Payment presented
by Lockbox Agent for collection that is returned unpaid for any reason shall be
redeposited once. If redeposit is not warranted for reasons such as "account
closed" or "payment stopped," or if any Instrument of Payment is returned unpaid
a second time, Lockbox Agent shall forward same to Borrower or, if so instructed
in writing by Lender, to Lender, and shall have no further obligation for
collection of such Instruments of Payment. If there are any other charges or
debits resulting from returned or otherwise dishonored Instruments of Payment,
such amounts will be the sole responsibility of Borrower. Undated Instruments of
Payment may be dated by Lockbox Agent to agree with the postmark date appearing
on the envelope in which such Instruments of Payment were received; provided,
however, that Lockbox Agent shall not deposit checks postdated three (3) or more
days or dated six (6) months or older, which checks will be forwarded to
Borrower or, if so instructed in writing by Lender, to Lender. Instruments of
Payment drawn in foreign currency shall be processed for collection, and any
corresponding collection charge will be charged to Borrower. Lockbox Agent shall
use its best efforts to notify Borrower of any Instrument of Payment or
accompanying correspondence that contains any irregularities or discrepancies
between the amount owed and the amount of the Instrument of Payment or that
bears the legend "Payment in Full," "Accord and Satisfaction," "Final
Settlement," or words of similar import, and Borrower shall make the
determination as to the future disposition of any such Instrument of Payment.
Except as specifically provided above, Lockbox Agent shall follow its general
procedures applicable to the presentment, collection, and deposit of negotiable
and non-negotiable instruments.
<PAGE>
5
7. Reports.
a. Not less frequently than once each week on the day
specified by Lender or Servicing Agent, Lockbox Agent shall:
(i) Transmit to Lender, Borrower, and Servicing
Agent, by mail and facsimile transmission, a receivables report for the
preceding week, listing the names of the Purchasers and other obligors from
which Instruments of Payment and wire transfers of funds were received by
Lockbox Agent, together with the amount of cleared funds so received and the
amount of any charges or debits resulting from the return or dishonor of checks
in respect of such Purchasers and other obligors; and
(ii) Transmit to Lender, Borrower, and Servicing
Agent, by mail and facsimile transmission, advice of credit documentation
indicating receipt and deposit into the Lockbox Account of funds represented by
Instruments of Payment and wire transfers received by Lockbox Agent, together
with disbursement information indicating payment to Lender, pursuant to Section
5 above, of the total amount of cleared funds contained in the Lockbox Account.
b. Within ten (10) days after the end of each calendar month
during the term of this Lockbox Agreement, Borrower shall deliver to Lender (i)
a detailed report relating to the Lockbox Collateral, including, for the
calendar month covered by such report, a list of each of all Pledged Notes
Receivable in respect of which Lockbox Agent is collecting funds; (ii) a list of
all payments received by Lockbox Agent in respect of the corresponding Pledged
Notes Receivable (including prepayments, if any); (iii) a statement of all
deposits into and disbursements from the Lockbox Account; and (iv) a list of all
Pledged Notes Receivable in respect of which payments were due, but were not
received, during such period.
c. Lockbox Agent shall retain a microfilm record of all
Instruments of Payment (front and back) deposited in the Lockbox Account. All
mail, correspondence, and documents delivered to the Lockbox or otherwise
received by Lockbox Agent pursuant to this Lockbox Agreement shall promptly be
delivered to Borrower and Servicing Agent. Upon request by either Borrower or
Lender, and upon payment of the fee then in effect for Lockbox Agent's customers
for such service generally, Lockbox Agent shall from time to time provide to
Borrower or Lender, as the case may be, photocopies of such microfilm records.
d. Lockbox Agent shall also deliver to Lender, at Borrower's
expense, such other reports as Lender may from time to time reasonably request.
e. Lockbox Agent shall promptly forward to Borrower and
Servicing Agent copies of all inquiries, demands, and other communications, if
any, that Lockbox Agent receives during the term of this Lockbox Agreement from
or concerning any Purchasers or other obligors
<PAGE>
6
under the Pledged Notes Receivable, or in respect of any of the Lockbox
Collateral, including any Instruments of Payment, or in respect of the duties
and obligations of Lockbox Agent.
f. In the event that any legal action or proceeding of any
kind is commenced relating to the Loan, any of the Lockbox Collateral, or this
Lockbox Agreement, Lockbox Agent shall deliver to Lender, promptly following
Lender's request therefor, such reports and materials as Lockbox Agent may have
in its possession related to the Lockbox Collateral, the Lockbox Account, or
this Lockbox Agreement which Lender reasonably deems relevant to such action or
proceeding.
8. Scope of Agency; Standard of Care.
a. Lockbox Agent is and shall act solely as the agent of
Lender pursuant to the terms and for the purposes set forth in this Lockbox
Agreement.
b. In the performance of its duties under this Lockbox
Agreement, Lockbox Agent shall exercise the same degree of care and devote the
same attention to such performance as it would if it were performing such duties
for Lockbox Agent's own account.
c. Lockbox Agent shall be protected in and is hereby released
by Lender and Borrower from any liability for action taken or omitted by it in
reliance upon written instructions delivered by Lender to Lockbox Agent
hereunder.
d. Lockbox Agent shall not be required to administer or
account for any Instruments of Payment or other funds or property unless the
same shall have first been received by Lockbox Agent pursuant to this Lockbox
Agreement.
e. Lockbox Agent shall be liable for all information,
documents, and instruments in its possession, custody, or control. Borrower and
Lender acknowledge that numerous discrepancies may occur when remittances are
made in cash, and Borrower and Lender agree to save and hold Lockbox Agent
harmless from and against any claims or demands of any nature and by whomever
that may be made against Lockbox Agent as a result of any such discrepancies,
unless such claims or demands arise from the gross negligence or willful
misconduct of Lockbox Agent.
9. Compensation/Expenses.
a. In consideration for the services to be rendered by Lockbox
Agent hereunder, Borrower shall pay directly to Lockbox Agent its normal and
customary fees as set forth on Schedule "B," attached hereto and incorporated
herein by this reference, and reimburse Lockbox Agent for all photocopying,
postage, telephone, and other expenses reasonably incurred by Lockbox Agent in
the performance of its services hereunder. Both Lockbox Agent and Borrower
expressly acknowledges that Lender shall have no liability or obligation
whatsoever for the payment or reimbursement to
<PAGE>
7
Lockbox Agent of any of the foregoing amounts or other compensation of any type
to Lockbox Agent.
b. Notwithstanding that Lockbox Agent's fees and expenses
shall be paid exclusively by Borrower and that Borrower shall be solely
responsible therefor, Borrower, Lender, and Lockbox Agent each acknowledge,
agree, and confirm that Lockbox Agent is and shall perform only as the exclusive
agent of Lender in accordance with the terms of and for the purposes set forth
in this Lockbox Agreement.
c. Lockbox Agent shall promptly notify Lender and Borrower if
Borrower fails to pay, within five (5) Business Days of the due date thereof,
any fees or other amounts due Lockbox Agent hereunder. In the event of any such
nonpayment, Lender may (but shall not be obligated to) authorize in writing
Lockbox Agent to offset from the balance then on deposit in the Lockbox Account
such amount as Lender shall specify in writing, and to apply such amount to all
or a portion, as the case may be, of the total amount of such fees and other
amounts as may from time to time be due and owing to Lockbox Agent; provided,
however, that Lockbox Agent's right of offset as provided herein, if any, shall
be subject at all times and in all events to Lender's prior written consent,
which Lender may reasonably or unreasonably grant or withhold in its sole
discretion. Lender's consent, if any, to any offset by Lockbox Agent on any
particular occasion shall not constitute a waiver or modification of any terms,
provisions, or conditions of this Lockbox Agreement and shall not be deemed to
constitute Lender's consent to any offset or other variation from such terms,
provisions, and conditions on any other occasion.
10. Termination.
a. This Lockbox Agreement may be terminated at any time by
either Lender or Lockbox Agent, without penalty to either party, by written
notice delivered by Lender or Lockbox Agent, as the case may be, to each of the
other parties. The effective date of termination shall be specified in such
notice; provided, however, that at the option of Lender, the effective date of
termination may be postponed to a date not more than ninety (90) days following
the date of Lender's receipt of such notice from Lockbox Agent.
b. Upon termination of this Lockbox Agreement for any
reason, Lockbox Agent shall provide to Lender, at Borrower's sole cost and
expense, such services as may be reasonably necessary in order to ensure an
orderly transition of Lockbox Agent's responsibilities hereunder, including,
without limitation, delivering to Lender, from and after such termination, all
mail, Instruments of Payment, and other items contained in the Lockbox, all
proceeds on deposit in the Lockbox Account, all other proceeds of the Lockbox
Collateral that may be held or received from time to time by Lockbox Agent, and
all related documents, instruments, reports, and records; and Lockbox Agent
shall otherwise reasonably cooperate with Lender.
<PAGE>
8
c. If not sooner terminated by Lender or Lockbox Agent as
provided above, upon Lockbox Agent's receipt of written notice from Lender
certifying that all of Borrower's Obligations under the Loan Documents have been
fully performed, this Lockbox Agreement shall be deemed terminated, effective
immediately. Upon termination pursuant to this Section 10, Lockbox Agent shall,
at Borrower's sole cost and expense, terminate the Lockbox, close the Lockbox
Account, and, from and after the effective date of such termination, deliver to
Borrower all mail, Instruments of Payment, and other items contained in the
Lockbox, all proceeds deposited in the Lockbox Account (less any fees or
expenses owed to Lockbox Agent), all other proceeds of the Lockbox Collateral
that may be held by Lockbox Agent, and all related documents, instruments,
reports, and records.
d. Upon termination of this Lockbox Agreement, Borrower shall
promptly pay to Lockbox Agent the total amount of any fees and other amounts
then due and payable to Lockbox Agent pursuant to the terms hereof.
e. Each of the sub-sections of this Section 10 shall survive
the termination of this Agreement.
11. Remedies. Upon the occurrence of a Default or an Event of Default
hereunder or under any of the other Loan Documents, at Lender's option, Lender
may immediately and without notice to Borrower (such notice being hereby
waived), apply against the Obligations any monies represented by Instruments of
Payment or other funds in the Lockbox, the Lockbox Account, or otherwise in the
possession, custody, or control of Lockbox Agent in connection with its duties
hereunder. In the event that Borrower files a petition for relief under the
United States Bankruptcy Code (the "Bankruptcy Code") or becomes the subject of
an involuntary proceeding thereunder that is not fully and finally dismissed
within forty-five (45) days of its filing, then, but only to the extent that the
applicable bankruptcy court determines after notice and hearing that Borrower
has any interest in the Lockbox, the Lockbox Account, or any proceeds of the
Lockbox Collateral, subject to court approval after notice and hearing, and with
such modifications as Lender may require, such proceeds shall be deemed cash
collateral, and this Lockbox Agreement shall be deemed a cash collateral
agreement, pursuant to Section 363 of the Bankruptcy Code. In addition,
effective immediately upon the filing of a bankruptcy petition by or against
Borrower, the automatic stay provisions of Section 362 of the Bankruptcy Code
are hereby modified as to Lender to the extent necessary to implement the
provisions of this Lockbox Agreement permitting Lender to apply the Lockbox
Collateral, including, without limitation, proceeds contained in the Lockbox or
Lockbox Account, against Borrower's Obligations, and the filing of financing
statements or other instruments and documents, if any, evidencing Lender's
security interests in post-petition Collateral; and Lender shall immediately and
without demand or notice (each of which is hereby expressly waived), be entitled
to relief from any automatic stay imposed under the Bankruptcy Code on or
against the exercise of Lender's rights and remedies otherwise available as
provided in the Loan Documents. Further, Borrower shall not seek, directly or
indirectly, in any proceeding under the Bankruptcy Code, any extension of the
exclusivity period otherwise available to a debtor under the Bankruptcy
<PAGE>
9
Code, including, without limitation, the exclusivity period afforded under
Section 1121(b) of the Bankruptcy Code.
Any right or remedy granted to Lender herein or in any other Loan
Document is separate, distinct, and cumulative and not exclusive of any other
right or remedy granted herein or in any other Loan Document or provided by law
or in equity; and all of the same may be exercised concurrently, independently,
or successively by Lender, in its sole and absolute discretion. Any forbearance
on the part of Lender in exercising any available right or remedy shall not
constitute a waiver of or preclude the exercise of such right or remedy in the
future. Lender shall not be deemed by any act or omission to have waived any
right or remedy or any Default or Event of Default unless such waiver is in
writing and signed by Lender, and then only to the extent specifically set forth
in such writing.
12. Consents and Authorizations. Borrower hereby consents to the
appointment and designation of Lockbox Agent as Lender's exclusive agent and
custodian for the purposes set forth herein and to all of the terms, provisions,
and conditions of this Lockbox Agreement.
13. Indemnification. Borrower hereby indemnifies and holds Lockbox
Agent harmless from and against any and all loss, cost, expense, and liability,
including but not limited to costs and reasonable attorneys' and paralegals'
fees and expenses, that may arise at any time (including any time after Lockbox
Agent is no longer acting in such capacity) incurred directly or indirectly as a
result of any act or omission of Lender or Borrower in connection herewith, in
connection with any of the Lockbox Collateral, or that may otherwise arise as a
result of Lockbox Agent's exercise or performance of any of its powers or duties
hereunder, except for claims arising from Lockbox Agent's gross negligence or
willful misconduct. Borrower will, at its sole cost and expense, defend any
action or proceeding instituted against Lockbox Agent that relates, directly or
indirectly, to the subject matter of this Lockbox Agreement. Notwithstanding the
foregoing, Lockbox Agent may elect to provide its own defense in any such
action, with the cost of such defense to be borne by Borrower.
14. Miscellaneous.
a. If any provision of this Lockbox Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable, this Lockbox Agreement
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof, and the remaining provisions of
this Lockbox Agreement shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there shall be added automatically as a part of this Lockbox
Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
<PAGE>
10
b. This Lockbox Agreement shall be governed by and construed
in accordance with the laws of the State of New York, exclusive of any choice of
law principles that would result in a choice of law other than the laws of the
State of New York.
c. This Lockbox Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
This Lockbox Agreement shall not be assignable by Borrower or Lockbox Agent
without the prior written consent of Lender. Lender may, without the consent of
the other parties to this Lockbox Agreement, assign its interest in this Lockbox
Agreement, in whole or in part; and in the event of such an assignment, Lender
shall promptly give notice thereof to Borrower and Lockbox Agent.
d. All notices, requests, and other communications to either
party hereunder shall be in writing and shall be given to such party at its
address set forth below or at such other address as such party may hereafter
specify for the purpose of notice to Lender, Borrower, or Lockbox Agent. Each
such notice, request, or other communication shall be effective (a) if given by
mail, when such notice is deposited in the United States Mail with first class
postage prepaid, and addressed as aforesaid, provided that such mailing is by
registered or certified mail, return receipt requested; (b) if given by
overnight delivery, when deposited with a nationally recognized overnight
delivery service such as Federal Express or Airborne, with all fees and charges
prepaid, addressed as provided below; or (c) if given by any other means, when
delivered at the address specified in this Section 14.d.:
If to Borrower: Eastern Resorts Company, LLC
115 Long Wharf
Newport, Rhode Island 02840
Attention: R. Perry Harris
With copy to: Equivest Finance, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Lisa M. Henson
If to Lender: Credit Suisse First Boston Mortgage Capital LLC
11 Madison Avenue
New York City, New York 10010-3629
Attention: Michael C. Szwajkowski, Vice President
If to Lockbox Agent: Seafirst Bank
802 "A" Street
Tacoma, Washington 98402
Attention: ______________________
<PAGE>
11
e. This Lockbox Agreement (including but not limited to
Schedules "A" and "B" hereto) may not be modified or amended, and no term,
provision, or condition hereof may be waived, except by a written instrument
signed by all of the parties hereto.
f. This Lockbox Agreement may be executed in counterparts,
each of which shall be deemed an original document but all of which,
collectively, shall constitute a single document.
g. Borrower agrees to pay all costs and expenses reasonably
incurred by Lender in connection with the evaluation, protection, assertion, and
enforcement of Lender's rights hereunder, including, without limitation, court
costs, audit expenses, collection charges, and attorneys' and paralegals' fees
and disbursements. Lockbox Age.
h. This Lockbox Agreement has been duly executed and delivered
by Lockbox Agent, Borrower, and Lender and constitutes a legal, valid, and
binding obligation of each such party, enforceable in accordance with its terms.
i. BORROWER, LOCKBOX AGENT, AND LENDER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS
LOCKBOX AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF
ANY PARTY. BORROWER, LOCKBOX AGENT, AND LENDER FURTHER WAIVE ANY RIGHT THEY MAY
HAVE TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN WHICH A JURY TRIAL HAS BEEN
WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN
WAIVED. FURTHER, BORROWER AND LOCKBOX AGENT HEREBY CERTIFY THAT NO
REPRESENTATIVE OR AGENT OF LENDER, INCLUDING LENDER'S COUNSEL, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION,
SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. BORROWER
ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT TO
LENDER'S ACCEPTANCE OF THIS LOCKBOX AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Borrower's Initials: _________
Lockbox Agent's Initials:_____
<PAGE>
12
IN WITNESS WHEREOF, Borrower, Lender, and Lockbox Agent have caused
this Lockbox Agreement to be duly executed as of the day and year first written
above.
Witnesses: BORROWER:
EASTERN RESORTS COMPANY, LLC, a Rhode
Island limited liability company
By: Eastern Resorts Corporation, a Delaware
corporation, its Managing Member
By:
- ---------------------- ----------------------------------
Its:
- ---------------------- ----------------------------------
Printed Name
LENDER:
CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC, a Delaware limited liability company
By:
- ---------------------- --------------------------------------------
Its:
- ---------------------- -------------------------------------------
Printed Name
LOCKBOX AGENT:
BANK OF AMERICA, a California corporation,
doing business as SEAFIRST BANK
By:
- ---------------------- --------------------------------------------
Its:
- ---------------------- -------------------------------------------
Printed Name
<PAGE>
SCHEDULE "A"
<PAGE>
SCHEDULE "B"
<PAGE>
EXHIBIT "D"
Permitted Liens and Encumbrances
The following represents liens and/or restrictions of record:
1. Declaration of Condominium of the Long Wharf Resort Condominium, dated
December 30, 1996 and recorded in the Newport Land Evidence Records on
December 30, 1996 in Book 749, at Page 317, as the same may, from time
to time, be amended.
2. By-laws of the Long Wharf Resort Condominium Association recorded in
the Newport Land Evidence Records on December 30, 1996 in Book 749, at
Page 343.
3. Settlement Agreement and Covenant Not to Sue between Eastern Resorts
Company, LLC and the State of Rhode Island Department of Environmental
Management, Division of Site Redediation, recorded in the Newport Land
Evidence Records on December 6, 1995 in Book 707, at Page 115.
4. First Amendment to Settlement Agreement and Covenant Not to Sue between
Eastern Resorts Company, LLC and the State of Rhode Island; recorded in
the Newport Land Evidence Records on August 7, 1996 in Book 743, at
Page 448.
5. Declaration of Parking and Utility Easement, recorded in the Newport
Land Evidence Records on September 12, 1996 in Book 738, at Page 231.
6. Grant of Easement from Eastern Resorts Company, LLC to the City of
Newport, dated December 23, 1996 and recorded in the Newport Land
Evidence Records on January 23, 1997 in Book 752, at Page 85.
7. Balance of taxes assessed December 31, 1997, not yet due and payable.
<PAGE>
EXHIBIT "E"
SERVICING AGREEMENT
This SERVICING AGREEMENT (the "Agreement ") is made and entered into as
of August __, 1998, by and between EASTERN RESORTS COMPANY, LLC, a Rhode Island
limited liability company ("Borrower"), CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC, a Delaware limited liability company ("Lender"), and WYNWOOD
AGENCY, INC., a Washington corporation ("Servicing Agent").
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to that certain Loan and
Security Agreement of even date herewith (the "Loan Agreement"), pursuant to
which Lender has agreed to make a loan to Borrower in the maximum principal
amount of ELEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($11,500,000) in
accordance with the terms, provisions, and conditions of the Loan Agreement and
the other Loan Documents; and
WHEREAS, Borrower has agreed to secure the Loan and the other
Obligations by, ,among other things, granting to Lender a continuing first
priority Lien and security interest in and to all of Borrower's right, title,
and interest in and to certain Notes Receivable and Purchase Agreements; and
WHEREAS, Servicing Agent is in the business of performing collection,
accounting, and reporting services with respect to documents and instruments
such as the afore-described Notes Receivable and Purchase Agreements.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties, intending to be legally
bound, hereby agree as follows:
1. TERMS AND DEFINITIONS. Except as otherwise expressly provided herein
to the contrary, all capitalized terms used herein shall have the meanings
ascribed to them in the Loan Agreement. In addition:
1.1 "Loan File" shall mean, for each Consumer Loan, a file
containing true copies of the applicable Pledged Note Receivable, together with
the related Purchase Agreement, credit report, loan application,
truth-in-lending disclosure statement, Payment Authorization Agreement (if any),
all related documents and instruments, and all other items and information
reasonably required by Servicing Agent for the performance of its duties and
obligations hereunder. At the request of Lender, Servicing Agent shall provide
Lender with written acknowledgment of Servicing Agent's receipt of each Loan
File.
1.2 "Loan Servicing" shall mean the servicing of the Pledged
Notes Receivable conducted by Servicing Agent hereunder.
<PAGE>
2
1.3 "Pool of Loans" shall mean all those Consumer Loans at any
time being serviced by Servicing Agent hereunder.
2. APPOINTMENT OF SERVICING AGENT. Servicing Agent is an independent
contractor that has been retained for the sole purpose of performing the Loan
Servicing under this Agreement, and Servicing Agent hereby agrees to perform the
Loan Servicing pursuant to the terms, provisions, and conditions set forth
below.
3. TERM OF AGREEMENT.
3.1 Term. The parties agree that the term of this Agreement
shall expire on the date as of which all of Borrower's Obligations under the
Loan Documents have been satisfied in full, unless earlier terminated in
accordance with Section 3.2 below.
3.2 Termination.
(a) This Agreement may be terminated at any time by either
Lender or Servicing Agent, without penalty to either party, by written notice
delivered by Lender or Servicing Agent, as the case may be, to each of the other
parties. The effective date of termination shall be specified in such notice;
provided, however, that at the option of Lender, the effective date of
termination may be postponed to a date not more than ninety (90) days following
the date of Lender's receipt of such notice from Servicing Agent.
(b) Upon termination of this Agreement for any reason,
Servicing Agent shall provide to Lender, at Borrower's sole cost and expense,
such services as may be reasonably necessary in order to ensure an orderly
transition of Servicing Agent's responsibilities hereunder, and Servicing Agent
shall otherwise reasonably cooperate with Lender. In particular, within five (5)
Business Days following the termination of this Agreement, Servicing Agent shall
deliver all Loan Files and other documents and materials in its possession,
custody, or control relating to the Consumer Loans being serviced hereunder to
Lender or such other Person as Lender may designate in writing. Servicing Agent
acknowledges that any failure or delay on its part in the delivery of such
documents and materials to Lender or its designee will cause irreparable injury
to Lender, not adequately compensable in damages, and for which Lender has no
adequate remedy at law. Servicing Agent further agrees that Lender may, in such
event, seek and obtain specific performance or other injunctive relief in any
court of competent jurisdiction.
(c) Upon termination of this Agreement, Borrower shall
promptly pay to Servicing Agent the total amount of any fees and other amounts
then due and payable to Servicing Agent pursuant to the terms hereof.
(d) Each of the sub-sections of this Section 3 shall survive
the termination of this Agreement.
<PAGE>
3
4. PERFORMANCE AND DUTIES OF SERVICING AGENT.
4.1 General Requirements of Servicing Agent. Servicing Agent
shall maintain a loan processing database and shall service each Consumer Loan
in accordance with generally accepted Loan Servicing standards and practices for
the types of loans in question. In the performance of its duties for Lender and
Borrower, unless otherwise specifically provided herein, Servicing Agent shall
comply fully with the terms of all Pledged Notes Receivable, Purchase
Agreements, and related documents and instruments. Servicing Agent shall send
monthly billing statements to all Purchasers within five (5) days after the end
of the calendar month with respect to which payments of interest, principal,
and/or other amounts are due, unless Servicing Agent has previously provided
such Purchasers with appropriate payment coupon books. Servicing Agent shall
collect and process all principal and interest payments and other amounts due
Lender, subject to the terms, provisions, and conditions of the Lockbox
Agreement, a copy of which is attached as Exhibit "A" hereto and hereby
incorporated herein by this reference. Servicing Agent shall at all times during
the term hereof perform all activities deemed reasonably necessary or
appropriate to collect all amounts due and owing under the Pledged Notes
Receivable, Purchase Agreements, and related documents and instruments.
Servicing Agent shall also provide Lender with monthly reports of all cash flow
(including any delinquencies or checks returned for insufficient funds),
together with such other information as may reasonably be requested by Lender.
4.2 Servicing Agent as Independent Contractor. Servicing Agent
shall have the status of an independent contractor, and nothing herein contained
shall be considered to create a partnership or joint venture between Lender and
Servicing Agent. Servicing Agent is not to be considered an agent or employee of
Lender for any purpose, and the employees of Servicing Agent are not entitled to
any of the benefits that Lender provides to its employees.
4.3 Standard of Performance. Servicing Agent shall at all
times act in good faith and in the best interests of Borrower and Lender, act as
a fiduciary with respect to the Consumer Loans and the proceeds thereof, and use
its best efforts and exercise sound business judgment in performing its duties
and responsibilities under this Agreement.
4.4 Lockbox. All payments received from Purchasers and other
obligors under the Pledged Notes Receivable and Purchase Agreements shall be
paid to Lockbox Agent and deposited into the Lockbox Account in the name of
Lender, all pursuant to the terms, provisions, and conditions of the Loan
Agreement and the Lockbox Agreement. Servicing Agent shall receive evidence of
all deposits made to the Lockbox Account and shall post them, on a daily basis,
to the appropriate Consumer Loans upon receipt.
4.5 Receipt of Payments by Servicing Agent. Any payments
received by Servicing Agent directly shall be held in trust for Lender and
delivered to Lockbox Agent for deposit into the Lockbox Account within two (2)
Business Days following Servicing Agent's receipt thereof.
<PAGE>
4
4.6 Receivables Advance Request. Servicing Agent shall perform
all such tasks and fulfill all responsibilities of Servicing Agent with respect
to Advances of the Receivables Component of the Loan as are set forth in Section
4.2(b) of the Loan Agreement, the provisions of which are incorporated herein by
this reference.
4.7 Description of Reports. For each calendar month (unless
requested by Lender on a more frequent basis) during the term of this Agreement,
Servicing Agent shall prepare the following standard industry reports and submit
them to Lender and Borrower by no later than the tenth (10th) day of the
succeeding calendar month:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(a) Title: Trial/Aging Balance Report
Purpose: Numerical listings of all Consumer Loans indicating the
outstanding principal balance of each and the aggregate
outstanding principal balance of all Consumer Loans.
(b) Title: Cash Receipts Report
Purpose: Numerical listings of all Consumer Loans showing the
following with respect to each and totals with respect to all
Consumer Loans: (i) payments received, including a
breakdown of principal, interest, and other amounts received;
and (ii) payments returned for non-sufficient funds.
(c) Title: Delinquency Report
Purpose: Numerical listings of all Consumer
Loans showing delinquencies, broken
down into columns indicating the
length of such delinquencies at
thirty (30) days, sixty (60) days,
and ninety (90) or more days.
(d) Title: Cancellation, Prepayment and Payoff Report
Purpose: Numerical listings of all Consumer Loans that were canceled,
paid off in their entirety, or the subject of a prepayment.
</TABLE>
Lender may, from time to time, in its reasonable discretion,
modify the foregoing reporting requirements and add reports required to be
prepared on a weekly, monthly, or such other periodic basis as Lender shall
reasonably request, which Servicing Agent shall complete in a timely fashion, at
Borrower's sole cost and expense. All reports sent to Lender shall remain
confidential in nature.
4.8 Notification to Obligors. Pursuant to the terms and
provisions of the Lockbox Agreement, upon the closing of each Consumer Loan,
Borrower shall have (a) directed or otherwise caused the Purchasers and other
obligors in respect of each Pledged Note Receivable to remit directly to Lockbox
Account all interest, principal, prepayments (both voluntary and mandatory), and
other
<PAGE>
5
amounts of any and every description payable to Borrower or its assignees by or
on behalf of such Purchasers or other obligors, pursuant to the applicable
Pledged Note Receivable, Purchase Agreement, or any related documents or
instruments; and (b) provided Lender with written evidence of such notification
in form and content reasonably acceptable to Lender.
5. BOOKS AND RECORDS.
5.1 General. At all times during the term of this Agreement,
Servicing Agent shall maintain complete and accurate files and records
pertaining to each Consumer Loan and of all business activities and operations
conducted by Servicing Agent in connection with its performance under this
Agreement, including, without limitation, all payments received, costs incurred,
and other information reasonably necessary or appropriate to give accurate and
complete accountings of the Consumer Loans and all amounts paid or to be paid
thereunder. All such files and records that pertain to a Consumer Loan that has
not been repaid in full shall be delivered to Lender or Lender's designee upon
termination of this Agreement.
5.2 Right to Examine Books and Records. At all times during
the term of this Agreement, Lender and its duly authorized agents and
representatives may, during normal business hours, inspect, audit, and make
copies (at Borrowers expense) of any of Servicing Agent's records, files,
reports, and related materials pertaining to the Consumer Loans and to Servicing
Agent's performance hereunder.
5.3 Facilities and Staff. Servicing Agent agrees to maintain
adequate facilities and staff for the proper performance of all services
required of Servicing Agent hereunder.
6. INDEMNIFICATION.
6.1 Servicing Agent's Indemnity. Servicing Agent agrees to
indemnify and hold Lender and all of its officers, directors, employees,
independent contractors, and other representatives harmless from and against any
and all claims, losses, penalties, fines, forfeitures, amounts paid in
settlement, judgments, reasonable attorneys' fees and related litigation costs,
fees, and expenses that result from: (a) any action taken by or on behalf of
Servicing Agent relating to any Consumer Loan that is not permitted by or
pursuant to the terms of this Agreement, the applicable Pledged Note Receivable,
Purchase Agreement, or any other document or instrument; (b) any illegal act or
omission by Servicing Agent; or (c) any act or omission constituting negligence,
willful misconduct, or breach of fiduciary duty by any officer, director,
employee, independent contractor, or other representative of Servicing Agent in
connection with Servicing Agent's performance under this Agreement.
6.2 Borrower's Indemnity. Borrower agrees to indemnify and
hold harmless Lender and all of its officers, directors, employees, independent
contractors, and other representatives from and against any and all claims,
losses, penalties, fines, forfeitures, amounts paid in settlement,
<PAGE>
6
judgments, reasonable attorneys' fees and related litigation costs, fees, and
expenses incurred in connection with third party claims against Servicing Agent
or Lender that result from:
(a) Any act or omission by or on behalf of Servicing
Agent in connection with Servicing Agent's actions within the scope of its
duties under this Agreement, unless (i) such act or omission constitutes
negligence, willful misconduct, or breach of a fiduciary duty; or (ii) such
losses are covered by insurance, in which event Servicing Agent shall be
indemnified only to the extent of any uninsured losses;
(b) Any act or omission constituting negligence or
breach of duty by an officer, director, employee, independent contractor, or
other representative of Borrower in connection with this Agreement.
7. COMPENSATION. As consideration for Servicing Agent's performance of
its duties and responsibilities hereunder, Borrower shall pay Servicing Agent
its normal and customary fees and reimburse Servicing Agent for all
photocopying, postage, telephone, and other expenses reasonably incurred by
Servicing Agent in the performance of the Loan Servicing. Both Borrower and
Servicing Agent expressly acknowledge that Lender shall have no liability or
obligation whatsoever for the payment or reimbursement to Servicing Agent of any
of the foregoing amounts or other compensation of any type to Servicing Agent.
8. MISCELLANEOUS.
8.1 Severability. If any provision of this Servicing Agreement
is held to be illegal, invalid, or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully severable, this
Servicing Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part hereof, and the remaining
provisions of this Servicing Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance therefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there shall be added automatically as a part of this
Servicing Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
8.2 Governing Law. This Servicing Agreement shall be governed
by and construed in accordance with the laws of the State of New York, exclusive
of any choice of law principles that would result in a choice of law other than
the laws of the State of New York.
8.3 Successors and Assigns. This Servicing Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. This Servicing Agreement shall not be assignable by
Borrower or Servicing Agent without the prior written consent of Lender. Lender
may, without the consent of the other parties to this Servicing Agreement,
assign
<PAGE>
7
its interest in this Servicing Agreement, in whole or in part; and in the event
of such an assignment, Lender shall promptly give notice thereof to Borrower and
Servicing Agent.
8.4 Notices. All notices, requests, and other communications
to either party hereunder shall be in writing and shall be given to such party
at its address set forth below or at such other address as such party may
hereafter specify for the purpose of notice to Lender, Borrower, or Servicing
Agent. Each such notice, request, or other communication shall be effective (a)
if given by mail, when such notice is deposited in the United States Mail with
first class postage prepaid, and addressed as aforesaid, provided that such
mailing is by registered or certified mail, return receipt requested; (b) if
given by overnight delivery, when deposited with a nationally recognized
overnight delivery service such as Federal Express or Airborne, with all fees
and charges prepaid, addressed as provided below; or (c) if given by any other
means, when delivered at the address specified in this Section 8.4:
If to Borrower: Eastern Resorts Company, LLC
115 Long Wharf
Newport, Rhode Island 02840
Attention: R. Perry Harris
With copy to: Equivest Finance, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Lisa M. Henson
If to Lender: Credit Suisse First Boston Mortgage Capital LLC
11 Madison Avenue
New York City, New York 10010-3629
Attention: Michael C. Szwajkowski, Vice President
If to Servicing
Agent: Wynwood Agency, Inc.
1001 Pacific Avenue
Suite 200
P.O. Box 2236
Tacoma, Washington 98401
Attention: Gail Strobl, Vice President
8.5 Amendments. This Servicing Agreement may not be modified
or amended, and no term, provision, or condition hereof may be waived, except by
a written instrument signed by all of the parties hereto.
<PAGE>
8
8.6 Counterparts. This Servicing Agreement may be executed in
counterparts, each of which shall be deemed an original document but all of
which, collectively, shall constitute a single document.
8.7 Payment of Costs. Borrower agrees to pay all costs and
expenses reasonably incurred by Lender in connection with the evaluation,
protection, assertion, and enforcement of Lenders rights hereunder, including,
without limitation, court costs, audit expenses, collection charges, and
attorneys' and paralegals' fees and disbursements.
8.8 Binding Obligation. This Servicing Agreement has been duly
executed and delivered by Servicing Agent, Borrower, and Lender and constitutes
a legal, valid, and binding obligation of each such party, enforceable in
accordance with its terms.
8.9 Jury Trial Waiver. BORROWER, SERVICING AGENT, AND LENDER
HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS SERVICING AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF ANY PARTY. BORROWER, SERVICING AGENT, AND LENDER FURTHER
WAIVE ANY RIGHT THEY MAY HAVE TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN
WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY
TRIAL CANNOT OR HAS NOT BEEN WAIVED. FURTHER, BORROWER AND SERVICING AGENT
HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF LENDER, INCLUDING LENDER'S
COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE
EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION. BORROWER ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION ARE A
MATERIAL INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS SERVICING AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
Servicing Agent's Initials: _____
8.10 Cooperation; Other Actions. To the extent reasonably
practicable, the parties hereto shall cooperate with and assist each other in
carrying out their respective obligations hereunder and, in connection
therewith, shall execute and deliver such documents and instruments and shall
take such action as may be necessary or appropriate in furtherance thereof.
<PAGE>
9
IN WITNESS WHEREOF, each of the parties hereto has caused this
Servicing Agreement to be duly executed on its behalf by persons thereunto duly
authorized as of the day and year first written above.
Witnesses: BORROWER:
EASTERN RESORTS COMPANY, LLC,
a Rhode Island limited liability company
By: Eastern Resorts Corporation, a Delaware
corporation, its Managing Member
By:
- ---------------------- ----------------------------------
Its:
- ---------------------- --------------------------------
Printed Name
SERVICING AGENT:
WYNWOOD AGENCY, INC., a Washington
corporation
By:
- ---------------------- ----------------------------------
Its:
- ---------------------- --------------------------------
Printed Name
LENDER:
CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC, a Delaware
limited liability company
By:
- ---------------------- ----------------------------------
Its:
- ---------------------- --------------------------------
Printed Name
<PAGE>
EXHIBIT "A"
LOCKBOX AGREEMENT
<PAGE>
EXHIBIT "F"
List of Units for Which No Unit Release Fee is Due Lender
R-174
R-176
R-178
R-180
R-184
R-186
R-188
R-194
R-271
R-273
R-274
R-275
R-276
All as described in that certain Declaration of Condominium of the Long
Wharf Condominium, dated December 30, 1996, and recorded on December 30, 1996,
in the Newport Land Evidence Records in Book 749, at Page 317, together with any
amendments, supplements, or restatements thereof.
<PAGE>
EXHIBIT "G"
RECEIVABLES ADVANCE REQUEST
DATE: August __, 1998
Credit Suisse First Boston Mortgage Capital LLC
11 Madison Avenue
New York City, New York 10010-3629
Attention: Michael C. Szwajkowski/
Courtney Miller (212-325-2897/
212-325-8299 [fax])
RE: Receivables Component of Loan in the Original
Principal Amount of $11,500,000, Pursuant to That
Certain Loan and Security Agreement Dated August __,
1998, By and Among Credit Suisse Mortgage Capital LLC,
Eastern Resorts Company, LLC, Equivest Finance, Inc.,
and Eastern Resorts Corporation (the "Loan Agreement")
Dear Mr. Szwajkowski:
This letter shall constitute a Receivables Advance Request, as such
term is defined in the Loan Agreement, for the Receivables Component Advance
pursuant to Section 4.2(b) of the Loan Agreement. All terms used but not
otherwise defined herein shall have the meanings ascribed to them in the Loan
Agreement.
Borrower hereby certifies as follows:
1. The principal amount of the Advance requested is $_____________.
2. The amount of the Borrowing Base as of the date hereof is $_________
as shown on the Borrowing Base Report, attached as Exhibit "A" hereto and hereby
incorporated herein by this reference.
3. All representations and warranties of Borrower contained in the Loan
Agreement are true and correct as of the date hereof and, after giving effect to
the making of the requested Advance, will be true and correct as of the date on
which the Receivables Component Advance is to be made. Each such representation
and warranty is hereby ratified and reaffirmed by Borrower in its entirety.
<PAGE>
2
4. No Default or Event of Default exists as of the date hereof and,
after giving effect to the making of the Receivables Component Advance, no
Default or Event of Default would exist as of the date on which the Receivables
Component Advance is to be made.
5. Borrower has no defenses to or set-offs against the payment of any
amounts owed Lender and the complete satisfaction of all of Borrower's other
Obligations under the Loan Documents.
6. The original Notes Receivable (endorsed to Lender in the manner
prescribed in the Loan Agreement) and Purchase Agreements listed in Schedule "A"
hereto have been delivered to Custodian, along with all other documents and
instruments required by the Loan Agreement to be delivered to Custodian.
7. Each Note Receivable listed on Schedule "A" hereto is an Eligible
Note Receivable, pursuant to Section 1.28 of the Loan Agreement.
8. Borrower has received no notice of any asserted or threatened
defense, offset, counterclaim, discount, or allowance in respect of any Note
Receivable or Purchase Agreement listed on Schedule "A" hereto.
9. All other conditions precedent to the making of the Receivables
Component Advance as set forth in Sections 3.5 and 4.2(b) of the Loan Agreement
or the applicable terms and provisions of any other Loan Document have been
fully satisfied.
10. Attached hereto are the following:
a. Schedule "A," hereby incorporated herein by this reference,
consisting of a true and complete list of all Notes Receivable and Purchase
Agreements in respect of which the Receivables Component Advance is requested,
which indicates the outstanding principal balance of each such Note Receivable
as of the Cut-Off Date, each such Note Receivable's maturity date and interest
rate, and such additional information as Lender may reasonably request with
respect to each such Note Receivable and Purchase Agreement.
b. An aging report on the Notes Receivable and Purchase
Agreements listed on Schedule "A" hereto.
c. A delinquency report showing which of the Notes Receivable
and Purchase Agreements listed on Schedule "A" hereto are contractually past due
and the duration of each such delinquency.
d. An original Pledge and Assignment of Notes Receivable and
Purchase Agreements in the form of Exhibit "B" to the Loan Agreement, duly
executed by an authorized
<PAGE>
3
representative of Borrower and appropriate for recordation in the Newport Land
Evidence Records, assigning to Lender all of Borrower's right, title, and
interest in and to each Note Receivable referenced in Schedules "A" thereto and
hereto, together with all corresponding Purchase Agreements and all accounts,
chattel paper, and general intangibles related thereto and the cash and non-cash
proceeds thereof.
e. Original executed UCC-1 financing statements corresponding
to the Pledge and Assignment of Notes Receivable and Purchase Agreements
referenced in paragraph e. above appropriate for recordation in the Newport Land
Evidence Records and filing with the Rhode Island Secretary of State.
f. Such additional items as Lender has reasonably required.
Borrower hereby certifies that the statements contained herein and the
attachments hereto are true, accurate, and complete in all respects. Borrower
acknowledges that Lender, in making the Receivables Component Advance, is
relying thereupon and that an Event of Default shall have occurred in the event
that any such statement, attachment, or Borrower's certifications with respect
thereto is false, misleading, or incorrect in any material respect as of the
date hereof.
Very truly yours,
EASTERN RESORTS COMPANY, LLC,
a Rhode Island limited liability company
By: EASTERN RESORTS
CORPORATION,
a Delaware corporation, its
Managing Member
By:
--------------------------------
Its:
--------------------------------
<PAGE>
EXHIBIT "A"
Borrowing Base Report
<PAGE>
SCHEDULE "A"
Notes Receivable and Purchase Agreements
<PAGE>
EXHIBIT "H"
Description of Pending Litigation
<PAGE>
Richard C. Winkler
Attorney at Law
(401)845-0119 Telefax: (401)846-3888
Member:
Rhode Island Bar 115 Long Wharf
Massachusetts Bar P.O. Box 2000
Newport, RI 02840
August 24, 1998
Credit Suisse First Boston Mortgage Capital, LLC
11 Madison Avenue
New York, NY 10010
Gentlemen:
Per the request of R. Perry Harris, President of Eastern Resorts
Corporation (ERCorp.), Managing Member of Eastern Resorts Company, LLC (ERC), I
have been asked to furnish information relative to all pending and threatened
litigation, claims and assessments to matters affecting ERC and/or ERCorp.
and/or property in which they have an interest. These are matter for which, to
the best of my knowledge, I have been engaged to devote substantive attention in
the form of legal consultation or representation.
I hereby advise you of the following matters:
1. 47 West 14th Street Corp. vs. Aetna Casualty & Surety Company et al.
(Providence Superior Court C.A. No. 92- )
This is an action by a Unit Owner of the Newport Onshore Condominium
against Aetna, Inn Group Associates (predecessor in title to ERC), the developer
of the Newport Onshore Condominium and various Condominium associations that are
part of the Newport Onshore Condominium. The complaint alleges that the
Defendants breached their various contractual and fiduciary duties in failing to
properly insure Plaintiff's Condominium Units in accordance with applicable
Condominium
<PAGE>
2
documentation and, as a result thereof, Plaintiff incurred extreme financial
losses as a result of a major fire to his Condominium Units. The position of the
Defendants is that the Plaintiff insisted on securing his own insurance for his
Units through Nationwide Insurance and Nationwide paid him in full for all
expenses and losses incurred by him as a result of the fire. This matter has
been turned over to both Aetna and the Association insurance company (Chubb) to
answer the claim and defend all parties to this action. Chubb notified IGA that
it has reserved its rights against the Board of Directors of the Newport Onshore
Condominium Association in accordance with the provisions of applicable
insurance policies, as a result of the deposition of the Plaintiff and his
contention that Aetna failed to insure his unit in accordance with applicable
law.
2. 360 Thames Street Condominium et al vs the
Landing Development Company et al
(Superior Court, Newport County) C.A. #NC-930375
This is an action by representatives of the 360 Thames Street
Condominium against the developer of the Landing Condominium and the Landing
Condominium Association (LCA). The LCA is an association of unit owners
including the unit known as Inn on the Harbor. The suit alleges that the
Association has an easement of 22 parking spaces within the Plaintiff's
condominium and has failed to pay its fair share of expenses and taxes related
to the parking spaces.
Prior to the construction of the Inn on the Harbor, the easement on the
360 Thames Street property provided that the LCA would be responsible for a
proportionate share of insurance and maintenance expenses and tax assessments
relating thereto. Prior to the 360 Thames Street property being declared a
condominium, the easement was modified to require the LCA to pay its
proportionate share of insurance and maintenance expenses and its proportionate
share of tax assessments, "if any". The words "if any" were clearly added and
clearly intended to signify the possibility that there might not be any tax
assessments to the easement. Under Rhode Island law, Common Areas and Limited
Common Areas do not qualify as assessable real property. Coincidentally, the 360
Thames Street Condominium Declaration identifies the area of the easement as
limited common area and further states that LCA will be responsible for the
proportionately allocated share of expenses for insurance and maintenance. The
word "taxes" is totally omitted as an expense obligation of the LCA under the
Condominium Declaration.
Prior to January 1, 1990, Inn Group Associates was the sole tenant of
all units of the 360 Thames Street Condominium and paid all expenses, including
taxes relating thereto. This fact narrows the scope of potential tax obligations
owed by the LCA. The LCA has paid numerous expenses relating to their easement
over the last five years and made a good faith payment of $3,000 toward the
resolution of this matter. If a trier of fact determines that the LCA has tax
obligations with respect to the 360 Thames Street Condominium, since there are
no taxes directly assessed to the eased ares, it will be difficult to determine
its pro-rata allocable portion of assessments to all units. In the event that a
reasonable allocation is made by a judge, as offset by payments previously made,
only 78.52%
<PAGE>
3
thereof will be allocable to the Inn on the Harbor Inn Owners' Association. The
LCA previously tendered a settlement offer to the 360 Thames Street Condominium
Association of an annual payment of $3,000. This offer was rejected. This matter
continues to be aggressively defended by the LCA.
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
- -- -- -- -- --
This response is limited by and in accordance with the ABA Statement of
Policy regarding Lawyers' Responses to Auditors Requests for Information
(December, 1975); without limiting the generality of the foregoing, the
limitations set forth in such Statement on the scope and use of this response
(paragraphs 2 and 7) are specifically incorporated herein by reference, and any
description herein of any "loss contingencies" is qualified in its entirety by
paragraph 5 of the Statement and the accompanying Commentary (which is an
integral part of the Statement). Consistent with the last sentence of paragraph
6 of the ABA Statement of Policy and pursuant to IGA's request, this will
confirm as correct IGA's understanding that whenever, in the course of
performing legal services for IGA, with respect to a matter recognized to
involve an unasserted possible claim or assessment that may call for financial
statement disclosure, I have formed a professional conclusion that IGA must
disclose or consider disclosure concerning such possible claim or assessment. I
will, as a matter of professional responsibility to IGA, so advise IGA and will
consult with IGA concerning the question of such disclosure and the applicable
requirements of Statement of Financial Accounting Standards No. 5.
This opinion does not include any reference to slip and falls and
similar type claims which are covered by insurance and presently being settled
or otherwise defended by applicable carriers. To the best of my knowledge, there
are no claims for which coverages in effect are insufficient to cover the
potential dollars claimed to be owed and in controversy.
Very truly yours,
Richard G. Winkler
Attorney at Law
RGW:bjr
<PAGE>
1
The following is a list of all pending litigation:
1. United States Bankruptcy Court, District of Nevada: In re: Mary Frances
Reynolds a/k/a Debbie Reynolds, Case No.: BK-S-97-25092-RCJ. Bankruptcy
of guarantor.
2. United States Bankruptcy Court, District of Nevada: In re: Debbie
Reynolds Hotel & Casino, Inc., a Nevada Corporation, Case No.:
BK-S-97-25089-RCJ; In re: Debbie Reynolds Hotel & Casino, Inc., a
Nevada Corporation, Case No.: BK-S-97-25090-RCJ; In re: Debbie Reynolds
Resorts, Inc., Case No.: BK-S-97-25091-RCJ. Bankruptcy of borrower.
3. State of South Carolina, Common Pleas Court of the Fourteenth Judicial
Circuit, County of Beaufort: Bennett Funding International, Ltd., n/k/a
Resort Funding, Inc. v. Atlantic Savings Bank, FSB, RIBI, Inc., et al.,
Civil Action No.: 97-CP-07-556. Foreclosure action against borrower;
actions on guarantees. Borrower counterclaimed alleging, inter alia,
breach of contract, breach of implied covenants of good faith and fair
dealing, and unfair trade practices. Status: discovery. Demand:
acceleration of note (approximately $3.6 million) and foreclosure.
Counterclaim demand: unspecified compensatory and punitive damages.
4. State of Florida, Circuit Court, Seventeenth Judicial Circuit, Broward
County: Joseph Mooney v. Equivest Finance Inc., et al., Case No.: CACE
96-952 18. Breach of contract action for which plaintiff, a former
employee of the company, seeks specific performance and contract
damages. Equivest counterclaimed, alleging wrongful retention of
property, interference with business and breach of contract. Status:
discovery. Demand: "in excess of $1,000,000." Counterclaim demand:
unspecified damages, treble damages.
5. State of Florida, Circuit Court, Seventeenth Judicial Circuit, Broward
County: Equivest Finance Inc. v. AA All Florida Insurers, Inc., Case
No.: CACE 96-6229-08. Breach of contract action for failure to return
unused insurance premiums and unearned commissions. Defendant
counterclaimed alleging, inter alia, breach of contract and fraud.
Status: discovery. Demand: unspecified. Counterclaim demand:
unspecified.
6. State of Florida, Division of Administrative Hearings: Department of
Banking and Finance v. Equivest Finance, Inc., Case No.: 96-5604. State
of Florida seeks recovery of unreimbursed insurance premiums (relating
to the business formerly conducted by the company) under the state's
escheatment and abandoned property laws. Status: awaiting appointment
of hearing officer for informal hearing. Demand: approximately
$324,000.
7. State of Georgia, Superior Court, County of Putnam: Tallulah River Co.
and Lak Oconee Resort Enterprises, Inc. v. Resort Funding, Inc. and
E.T. Bennett, Case No.: 96-CV-177- 6. Breach of contract and conversion
action and seeks compensatory and punitive damages. Claims relate to
"old" Resort Funding, Inc. Status: dormant. Plaintiff has
<PAGE>
2
taken no action. Resort Funding, Inc. has not filed a response so as
to be subject to jurisdiction. Demand: unspecified compensatory and
punitive damages.
8. United States Bankruptcy Court, Northern District of New York: Bennett
Funding Group, Inc. v. Generali U.S. Branch, et al., Case No. 96-61376,
Adv. Proc. No.: 96- 70195A. Third-party complaint filed by Generali
against Resort Funding, Inc., seeking declaration as to Generali's
obligations under insurance policies which name Resort Funding, Inc. as
loss payee. Status: answer filed. Awaiting outcome of BFG/Generali
settlement discussions.
9. State of Florida, Circuit Court, Eleventh Judicial Court, Dade County:
Linda Klompus as Trustee for the Bright Family Trust and the Bennett
Family Trust, Albert J. Carpel, as Trustee for the Albert J. Carpel
Revocable Trust, Daniel Ungar and Evelyn Ungar as Co- Trustees of the
Evelyn Ungar Trust, Daniel Ungar, Evelyn Ungar, Albert Fader, Carol
Fader, Herbert Miller, Jack Bellock as Trustee Under Agreement dated
August 24, 1984, Florence Bellock as Trustee under Agreement dated
August 24, 1984, and Jack Bellock as General Partner of Alf Realty
Associates of Teaneck, New Jersey v. First Miami Securities, Inc.,
Bennett Funding International, now doing business as Equivest Finance
Inc., et al., Case No.: 96-10615 CA 20. Suit by former Bennett
investors claiming fraud, violations of Florida's securities and
investor protection Act, and breach of fiduciary duty. Demand:
unspecified monetary damages.
Class Actions:
State of New York, Supreme Court, County of New York
1. In Re: Bennett Companies Investors Litigation; Consolidated Index No.:
601927/96: Case No.: 11320. Action stayed pending outcome of Federal
Court Class Action which does not name Resort Funding, Inc.
Consolidated Complaint asserts claims for the following: (1) common law
fraud and negligent misrepresentations; (2) violations of Section
12(a)(1), 12(a)(2) and 15 of the Securities Act; (3) violations of
General Business Corporation Section 349; (4) dissemination of
materially false and/or deceptive documents and statements; (5)
knowingly, recklessly, or negligently engaging in wrongful behavior
alleged in complaint; and (b) breach of fiduciary responsibility.
Status: actions stayed pending outcome of Federal Court class action,
which does not name Resort Funding, Inc.
a. Josephine C. Thornton, Edwin Collins, Judith Jacobson and
Daryl Hagler on behalf of themselves and all other similarly
situated v. Bennett Finance, Inc.; Bennett Funding
Corporation; Resort Funding, Inc.; Bennett Funding
International, Ltd.; The Processing Center, Inc.; Bennett
Insurance Company; Bennett Travel Management Group; Aloha
Capital; Jameson DeWitt & Associates, Inc.; Equivest Finance,
Inc.; Aegis Consumer Funding Group, Inc.; Edmund T. Bennett;
Kathleen M. Bennett; Patrick R. Bennett; Michael A. Bennett;
William R. Crowley; Kevin J.
<PAGE>
3
Kuppel; Kenneth P. Kasarjian; The Kenton Group Inc. f/k/a
Kenton Portfolio Management, Inc.; Beckett Reserve Fund
L.L.C.; Scriptex, Inc.; Mahoney Cohen & Company, P.C.; Halpert
& Co.; American Eagle Investments, Inc.; Stoever Glass Co.;
Crawford & Associates; First Miami Securities, Inc.; Weiner
Abrams & Co.; and John Does 1 through 100; 96-602297
b. Marilyn Morritt; Eva Rokacz and Sylvia Pinkel, on behalf of
themselves and all other similarly situated v. Bennett Finance
Inc.; Resort Funding, Inc.; Bennett Funding International,
Ltd.; The Processing Center, Inc.; Bennett Insurance Company;
Aloha Capital; Edmund T. Bennett; Kathleen M. Bennett; Patrick
R. Bennett, Michael A. Bennett; William P. Crowley; Kevin J.
Kuppel; Mahoney Cohen & Company PC; Halpert & Co.; American
Eagle Investments Inc.; Stoever Glass Co.; Crawford
Associates; and John Doe 1 through 100; 96-601927
c. Ray Walker; Joyce Walker; Dorothy Walker; Linda Kyriakos;
Sandord L. Mendelson; DDS Pension Plan; John M. Malley; David
Rapp; Sylvia Rapp; and Janis Oolie Feldman, on behalf of
themselves and all others similarly situated v. Bennett
Finance Inc.; Resort Funding Inc.; Bennett Funding
International, Ltd.; Bennett Insurance Company; Edmund T.
Bennett; Kathleen M. Bennett; Patrick R. Bennett; Michael A.
Bennett; William P. Crowley; Kevin J. Kuppel; The Equitable
Companies Incorporated; Creative Bennett Consultants; Estate
of George W. Grim; Halpert & Co.; Dollar Capital Corp.;
Mahoney Cohen & Company, P.C. and John Does 1 through 100;
96-602779
<PAGE>
EXHIBIT "I"
Form of Section 6.1(g) Reports
<PAGE>
EXHIBIT "I"
BORROWING BASE REPORT
As of __________ __, 1998
Aggregate Outstanding Principal Balance of All
Eligible Notes Receivable As of the Above Date: $_______________
BORROWING BASE CALCULATION:
90% of Aggregate Outstanding Principal
Balance of All Such Eligible Notes Receivable: $_______________
Submitted by: EASTERN RESORTS COMPANY, LLC,
a Rhode Island limited liability company
By: Eastern Resorts Corporation, a
Delaware corporation, its Managing
Member
By:
--------------------------------
Its:
--------------------------------
LOAN AND SECURITY AGREEMENT
---------------------------
$15,000,000 Loan Facility
provided by
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
to
EQUIVEST FINANCE, INC.
EASTERN RESORTS COMPANY, LLC
RESORT FUNDING, INC. and
EASTERN RESORTS CORPORATION
As of August 25, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION 1. DEFINITION OF TERMS ................................... 1
1.1 Advance. .............................................. 1
1.2 Affiliate. ............................................ 1
1.3 Agreement. ............................................ 2
1.4 Applicable Declaration. ............................... 2
1.5 Applicable Jurisdiction. .............................. 2
1.6 Applicable Laws. ...................................... 2
1.7 Applicable Mortgage. .................................. 2
1.8 Applicable Resort. .................................... 2
1.9 Applicable Timeshare Documents. ....................... 2
1.10 Applicable Underlying Borrower. ....................... 2
1.11 Applicable Underlying Guarantor. ...................... 2
1.12 Applicable Underlying Loan. ........................... 2
<PAGE>
1.13 Applicable Underlying Loan Collateral. ................ 3
1.14 Applicable Underlying Loan Documents. ................. 3
1.15 Architect. ............................................ 3
1.16 Base Rate. ............................................ 3
1.17 Borrower. ............................................. 3
1.18 Business Day .......................................... 3
1.19 Closing Date. ......................................... 3
1.20 Code. ................................................. 3
1.21 Collateral. ........................................... 4
1.22 Commitment. ........................................... 6
1.23 Common Elements. ...................................... 6
1.24 Common Furnishings. ................................... 6
1.25 Construction Contract. ................................ 6
1.26 Construction Mortgage. ................................ 6
1.27 Custodial Agreement. .................................. 6
1.28 Custodian. .......................................... 6
1.28A Debbie Reynolds Resort ................................ 6
1.30 Debbie Reynolds Resort Third Mortgage Loan ............ 7
1.31 Debtor Relief Laws. ................................... 7
1.32 Default. .............................................. 7
1.33 Default Rate. ......................................... 7
1.34 Eastern ............................................... 7
1.34A Eastern, LLC. ......................................... 7
1.35 Eligible Note Receivable. ............................. 7
1.36 Encumbered Interval. .................................. 9
1.37 Encumbered Personal Property. ......................... 9
1.38 Environmental Laws. ................................... 9
1.39 Equivest ............................................... 9
1.40 Event of Default. ...................................... 9
1.41 Financed Improvements. ................................. 9
1.42 Financial Statements. .................................. 10
1.43 GAAP. .................................................. 10
1.44 General Contractor ..................................... 10
1.45 Hazardous Materials .................................... 10
1.46 Interest Rate .......................................... 10
1.47 Interval. .............................................. 10
1.48 Inventory Mortgage. .................................... 10
1.48A Irish Resorts .......................................... 10
1.49 Land. .................................................. 11
1.50 Lien. .................................................. 11
1.51 Loan. .................................................. 11
1.52 Loan Documents. ........................................ 11
1.53 Lockbox Agent .......................................... 12
1.54 Lockbox Agreement. ..................................... 12
<PAGE>
1.55 Long Wharf Loan ........................................ 12
1.56 Maturity Date .......................................... 12
1.57 Minimum Net Worth Requirement. ......................... 13
1.58 Minimum Quarterly Net Income Requirement ............... 13
1.59 Mortgaged Real Property. ............................... 13
1.60 Net Worth .............................................. 13
1.61 Note. .................................................. 13
1.62 Note Receivable. ....................................... 13
1.63 Obligations. ........................................... 13
1.64 Permitted Liens and Encumbrances ....................... 14
1.65 Person. ................................................ 14
1.66 Phase I Environmental Inspection. ...................... 14
1.67 Plans. ................................................. 14
1.68 Pledged Note Receivable. ............................... 14
1.69 Prime Rate. ............................................ 15
1.70 Qualified Borrower. .................................... 15
1.71 Qualified Loan ......................................... 15
1.72 Qualified Resort. ...................................... 15
1.73 Release Fee ............................................ 15
1.74 Resort Funding ......................................... 15
1.75 Servicing Agent. ...................................... 15
1.76 Servicing Agreement. ................................... 16
1.77 Survey. ................................................ 16
1.79 Timeshare Construction Credit Facility ................. 16
1.80 Timeshare Receivables Hypothecation Facility ........... 16
1.81 Timeshare Receivables Purchase Facility. ............... 16
1.82 Underlying Guaranty. ................................... 16
1.83 Unit. .................................................. 17
1.84 Warrants. .............................................. 17
SECTION 2. THE LOAN ............................................... 17
2.1 Purposes. .............................................. 17
2.2 Intentionally Omitted .................................. 17
2.3 Single Advance. ........................................ 17
2.4 Interest Rate. ......................................... 17
2.5 Payments. .............................................. 18
2.6 Prepayments. ........................................... 18
2.7 Intentionally Omitted .................................. 18
SECTION 3. COLLATERAL ............................................. 18
3.1 Grant of Security Interest. ............................ 18
3.2 Security Interest in All Pledged Notes Receivable. ..... 19
3.3 Financing Statements. .................................. 19
3.4 Location of Collateral. ................................ 19
3.5 Protection of Collateral; Reimbursement. ............... 19
<PAGE>
3.6 Cross-Collateralization and Default. ................... 20
SECTION 4. CONDITIONS PRECEDENT TO CLOSING ........................ 20
4.1 The Loan. .............................................. 20
4.2 Applicable Underlying Loans. ........................... 23
SECTION 5. GENERAL REPRESENTATIONS AND WARRANTIES ................. 28
5.1 Organization, Standing, Qualification .................. 29
5.2 Authorization, Enforceability, Etc. .................... 29
5.3 Intentionally Omitted .................................. 31
5.4 Financial Statements and Business Condition ............ 31
5.5 Taxes .................................................. 32
5.6 Title to Properties; Prior Liens ....................... 32
5.7 Subsidiaries, Affiliates, and Capital Structure ........ 32
5.8 Litigation, Proceedings, Etc. .......................... 32
5.9 Environmental Matters .................................. 33
5.10 Full Disclosure ........................................ 33
5.11 Use of Proceeds/Margin Stock ........................... 33
5.12 No Defaults ............................................ 34
5.13 Restrictions of Borrower ............................... 34
5.14 Broker's Fees .......................................... 34
5.15 Tax Identification/Social Security Numbers ............. 34
5.16 Legal Compliance. ...................................... 34
5.17 Continuation and Investigation. ....................... 35
5.18 Intentionally Omitted .................................. 35
5.19 Management's Background ................................ 35
5.20 Subsidiaries ........................................... 35
5.21 Eastern Merger ......................................... 35
5.22 Solvency ............................................... 36
5.23 Year 2000. ............................................. 36
SECTION 6. COVENANTS .............................................. 36
6.1 Affirmative Covenants .................................. 36
6.2 Right of Lender to Inspect Property .................... 44
6.3 Negative Covenants ..................................... 44
SECTION 7. EVENTS OF DEFAULT ...................................... 50
7.1 The Loan. .............................................. 50
7.2 Applicable Underlying Loans. ........................... 52
SECTION 8. REMEDIES ............................................... 54
8.1 Remedies Upon Default .................................. 54
8.2 Notice of Sale ......................................... 56
8.3 Application of Collateral; Termination of Agreements ... 57
8.4 Rights of Lender Regarding Collateral .................. 57
<PAGE>
8.5 Delegation of Duties and Rights ........................ 58
8.6 Lender Not in Control .................................. 58
8.7 Waivers ................................................ 58
8.8 Cumulative Rights ...................................... 59
8.9 Expenditures by Lender ................................. 59
8.10 Diminution in Value of Collateral ...................... 59
SECTION 9. CERTAIN RIGHTS OF LENDER .............................. 59
9.1 Protection of Collateral ............................... 59
9.2 Performance by Lender .................................. 59
9.3 No Liability of Lender ................................. 60
9.4 Right to Defend Action Affecting Security .............. 61
9.5 Expenses ............................................... 61
9.6 Lender's Right of Set-Off ............................. 61
9.7 Right of Lender to Extend Time of Payment, Substitute,
Release Security, Etc ................................. 62
9.8 Assignment of Lender's Interest ........................ 62
9.9 Notice to Purchaser .................................... 62
9.10 Collection of the Notes ................................ 62
9.11 Power of Attorney ...................................... 63
9.12 Relief from Automatic Stay, Etc. ....................... 63
9.13 Investigations and Inquiries ........................... 64
9.14 Verification of Use. ................................... 64
SECTION 10. TERM OF AGREEMENT ...................................... 64
SECTION 11. MISCELLANEOUS .......................................... 67
11.1 Notices ................................................ 67
11.2 Survival ............................................... 68
11.3 Governing Law .......................................... 69
11.4 Consent to Jurisdiction, Etc. .......................... 69
11.5 Limitation on Interest ................................. 70
11.6 Invalid Provisions ..................................... 70
11.7 Successors and Assigns ................................. 71
11.8 Amendment .............................................. 71
11.9 Counterparts; Effectiveness ............................ 71
11.10 Lender Not a Fiduciary ................................. 71
11.11 Release and Return of Notes Receivable ................. 71
11.12 Accounting Principles ................................ 72
11.13 Entire Agreement ....................................... 72
11.14 Litigation ............................................ 72
11.15 Incorporation of Exhibits and Schedules ................ 73
11.16 Consent to Advertising and Publicity of Applicable
Timeshare Documents .................................... 73
11.17 Directly or Indirectly ................................. 73
<PAGE>
11.18 Captions ............................................... 73
11.19 Gender ................................................. 73
11.20 No Duty ................................................ 73
11.21 Reimbursement for Taxes ................................ 73
11.22 Submissions ............................................ 74
11.23 Confidentiality. ....................................... 74
11.24 Borrower Acknowledgment ................................ 74
11.25 Loans to Eastern Resorts Company, LLC .................. 75
11.26 Consent by Lender. ..................................... 75
11.27 Final Agreement ........................................ 75
LIST OF EXHIBITS
----------------
EXHIBIT "A" Custodial Agreement
EXHIBIT "B" Form of Lockbox Agreement
EXHIBIT "C" Permitted Liens and Encumbrances
EXHIBIT "D" List of Applicable Underlying Loans
EXHIBIT "E" Form of Servicing Agreement
EXHIBIT "F" Form of Warrant to Purchase Shares of
Common Stock of Equivest Finance, Inc.
EXHIBIT "G" Pending Litigation
EXHIBIT "H" Form of Pledge and Assignment of Note
Receivable and Applicable Mortgage
EXHIBIT "I" Registration Rights Agreement
EXHIBIT "J" Commitment
EXHIBIT "K" Intentionally Omitted
EXHIBIT "L" Existing Liens
Schedule A Schedule of Excluded Stock Issuances
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT is made and entered into as of August 25,
1998, by and among RESORT FUNDING, INC., a Delaware corporation, EQUIVEST
FINANCE, INC., a Florida corporation, EASTERN RESORTS COMPANY, LLC, a Rhode
Island limited liability company, and EASTERN RESORTS CORPORATION, a Delaware
corporation, jointly and severally (collectively, the "Borrower") and CREDIT
SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a Delaware limited liability company
("Lender").
In consideration of the mutual covenants and agreements contained herein
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties to this Agreement, intending to be legally
bound, hereby agree as follows:
SECTION 1. DEFINITION OF TERMS
-------------------
The capitalized terms used in this Agreement are defined in this Section
1. The definitions include the singular and plural forms of the terms defined.
1.1 Advance. The proceeds of the Loan which shall be disbursed by Lender
to Equivest in a single advance in accordance with the terms of this Agreement.
1.2 Affiliate.
(a) Any shareholder, officer, director, general partner, or member
of any Borrower; and
(b) Any Person that, directly or indirectly, through one (1) or
more intermediaries, controls, is controlled by, or is under common control with
any Borrower or for which any other Affiliate of any Borrower is an officer,
director, shareholder, general partner, or member. For purposes of the
definition of "Affiliate:" (i) shall be deemed to control a corporation if that
Person, either alone or pursuant to an arrangement or understanding with one (1)
or more other Persons, (A) owns, controls, or has the power to vote (including
by proxy) greater than fifty percent (50%) of any class of voting securities of
a corporation or that determines in any manner the election or appointment of a
majority of the directors thereof; or (B) has the power or practical ability to
exercise a controlling influence over the management or policies of such
corporation, shall be presumed to be in control of said corporation; and (ii) a
Person shall be deemed to be in control of a Person other than a corporation if
he or it, either alone or pursuant to an arrangement or understanding with one
(1) or more other Persons, (A) owns, controls, or has the power to vote
(including by proxy) greater than fifty percent (50%) of the equity or
beneficial interest of such Person; or (B) has the power or practical ability to
exercise a controlling influence over the management or policies of such Person.
<PAGE>
1.3 Agreement. This Loan and Security Agreement by and among Borrower and
Lender (including the exhibits and schedules hereto), as it may be amended
and/or restated from time to time.
1.4 Applicable Declaration. With respect to an Applicable Resort, the
declaration of condominium, declaration of covenants, conditions, and
restrictions, master deed, or similar document, together with any amendments or
restatements thereof, that establishes the underlying form of ownership of such
Applicable Resort and is recorded in the appropriate public records of the
Applicable Jurisdiction.
1.5 Applicable Jurisdiction. With respect to an Applicable Resort, the
state, county, municipality, and/or other governmental jurisdiction in which
such Applicable Resort is located.
1.6 Applicable Laws. With respect to an Applicable Resort, any and all
federal, state, and local statutes, ordinances, rules, regulations, court orders
and decrees, administrative orders and decrees, and other legal requirements of
any and every conceivable type to which any Borrower, such Applicable Resort or
any portion thereof, or all or any portion of the Collateral or any Applicable
Underlying Loan Collateral is or becomes subject from time to time.
1.7 Applicable Mortgage. An Inventory Mortgage or a Construction
Mortgage.
1.8 Applicable Resort. As to any Borrower, a Qualified Resort in
connection with which such Borrower has made a Qualified Loan to a Qualified
Borrower.
1.9 Applicable Timeshare Documents. All Applicable Declarations and other
documents and instruments relating to an Applicable Resort and/or the Units,
Common Elements, Common Furnishings, and Intervals thereat, including but not
limited to the marketing, sale, and financing of such Intervals. Each Applicable
Timeshare Document shall be in form and content acceptable to Lender, in its
sole discretion. Lender shall have received and approved true, correct, and
complete copies of all Applicable Timeshare Documents as a condition precedent
to any Advances hereunder in respect of the Applicable Resort to which such
Applicable Timeshare Documents pertain.
1.10 Applicable Underlying Borrower. As to any Borrower, a Qualified
Borrower that is the maker of a Pledged Note Receivable naming such Borrower as
payee.
1.11 Applicable Underlying Guarantor. As to any Borrower, any Person that
has executed and delivered an Underlying Guaranty in favor of such Borrower in
connection with an Applicable Underlying Loan.
1.12 Applicable Underlying Loan. A Qualified Loan which Lender has agreed
to accept as collateral hereunder, as specifically set forth on Exhibit "D"
attached hereto and incorporated herein by this reference.
<PAGE>
1.13 Applicable Underlying Loan Collateral. As to any Borrower, any and
all collateral granted to such Borrower to secure the payment by an Applicable
Underlying Borrower of all principal, interest, and other amounts owed to such
Borrower by such Applicable Underlying Borrower in connection with an Applicable
Underlying Loan.
1.14 Applicable Underlying Loan Documents. All documents and instruments
that evidence or secure an Applicable Underlying Loan by such Borrower,
including but not limited to any Notes Receivable, Underlying Guarantees, and
Applicable Mortgages executed and delivered to such Borrower in connection
therewith. The form and content of each Applicable Underlying Loan Document
shall be satisfactory to Lender, in its sole and absolute discretion. Such
Borrower agrees not to amend, restate, or otherwise modify any Applicable
Underlying Documents in a material manner without Lender's prior written
consent, which consent may be granted or withheld, in Lender's sole and absolute
discretion. Copies of any such amended, restated, or otherwise modified
Applicable Underlying Loan Document, as so approved by Lender, shall be provided
to Lender promptly following the effective date thereof.
1.15 Architect. A licensed architect in an Applicable Jurisdiction
approved by the applicable Borrower.
1.16 Base Rate. On any given date, a fluctuating rate of interest equal
to the interest rate per annum offered for one (1) month deposits in U.S.
dollars in the London interbank market that appears on Telerate Page 3750 or
such other page as may replace Page 3750 on that service or such other service
or services as may be nominated by the British Bankers Association for the
purpose of displaying such rate (collectively, "Telerate Page 3750") as of 9:00
a.m. New York time on the date in question (the "Libor Rate"); provided,
however, that in the event that (i) more than one (1) such Libor Rate is
published, then the average of such rates shall apply; or (ii) no such Libor
Rate is published, then the Libor Rate shall be determined from such comparable
financial reporting company as Lender, in its sole discretion, shall select.
1.17 Borrower. Resort Funding, Inc., a Delaware corporation, Equivest
Finance, Inc., a Florida corporation, Eastern Resorts Company, LLC, a Rhode
Island limited liability company, and Eastern Resorts Corporation, a Delaware
corporation, formerly known as ERC Acquisition Corp., jointly and severally,
together with their respective successors and assigns.
1.18 Business Day. Each day that is not a Saturday, Sunday, or a legal
holiday under the laws of the State of New York or the United States.
1.19 Closing Date. The date of this Agreement.
1.20 Code. The version of the Uniform Commercial Code in effect from time
to time in an Applicable Jurisdiction, as amended from time to time.
<PAGE>
1.21 Collateral. Collectively, all now-owned or hereafter acquired right,
title and interest of each Borrower in and to:
(a) the Pledged Notes Receivable, together with all accounts,
chattel paper, and general intangibles related thereto and the cash and non-cash
proceeds thereof;
(b) all Applicable Underlying Loan Collateral for any and all of
the Pledged Notes Receivable;
(c) all now owned or hereafter acquired right, title, and interest
of any Borrower in and to any and all of the collateral for the Timeshare
Receivables Purchase Facility, the Timeshare Construction Credit Facility, the
Timeshare Receivables Hypothecation Facility, the Long Wharf Loan and any other
timeshare-related loan or credit facility between Lender and Borrower or an
Affiliate of Borrower;
(d) all assets of Eastern which are unencumbered as of the date of
the Commitment or the Closing Date or which become free of encumbrances prior to
repayment in full of the Obligations;
(e) all of the outstanding capital stock of Eastern;
(f) all of the outstanding membership interests of Eastern, LLC;
and
(g) all assets of Eastern, LLC which are unencumbered as of the
date of the Commitment or the Closing Date or which become free of encumbrances
prior to repayment in full of the Obligations.
The Collateral shall include all right, title and interest of each
Borrower in and to, but not be limited to, the following (to the extent
applicable):
(i) The Applicable Mortgages;
(ii) All Encumbered Personal Property, together with the
cash and
non-cash proceeds thereof, with appropriate non-disturbance language relating to
common area furniture, furnishings, equipment, and fixtures;
(iii) Any and all leases, subleases, licenses, concessions,
entry
fees, and other agreements that grant a possessory interest in and to, or the
right to use, any Mortgaged Real Property, Encumbered Intervals, Encumbered
Personal Property, or any portion thereof (collectively, the "Resort Leases");
(iv) All of the rents, revenues, income, proceeds,
royalties, profits, and other amounts payable for using, leasing, licensing,
possessing, operating from or in,
<PAGE>
or otherwise enjoying all or any portion of any Mortgaged Real Property,
Encumbered Personal Property, or Encumbered Intervals, including, without
limitation, damages received upon the occurrence of a default under any of the
Resort Leases and all proceeds payable under any policy of insurance covering
loss of rents with respect thereto (collectively, the "Resort Income");
(v) All other agreements to which any Applicable Underlying
Borrower is or becomes a party or holds any interest and which in any way relate
to the use, occupancy, maintenance, or enjoyment of any Mortgaged Real Property,
Encumbered Personal Property, or Encumbered Intervals, including but not limited
to utility contracts, maintenance agreements, management agreements, service
contracts, and any agreement guaranteeing the performance of the obligations
contained in any of the foregoing agreements;
(vi) The Plans, all agreements for the furnishing of
architectural, engineering, and/or design services, and all construction
contracts and other agreements for the furnishing of labor and/or materials in
connection with the development and construction of the Financed Improvements;
(vii) Any and all easements, contracts, leasehold interests
(whether as lessor or lessee), permits, licenses, and approvals in respect of
all or any portion of an Applicable Resort;
(viii) All inventory, supplies, accounts, chattel paper,
and general intangibles owned or hereafter acquired by any Borrower or any
Underlying Borrower, used or useful in connection with, and placed or to be
placed on or under any of the Mortgaged Real Property, including but not limited
to the Units contained therein, and the Encumbered Intervals, together with the
cash and non-cash proceeds thereof;
(ix) All documents, instruments, accounts, chattel paper,
and general intangibles relating to the Pledged Notes Receivable and the other
Collateral, including the cash and non-cash proceeds thereof;
(x) All books, records, reports, computer tapes, computer
disks, and software relating to all or any portion of the Collateral;
(xi) All employment, non-competition or other agreements
between any Borrower and senior management of such Borrower; and
(xii) Extensions, additions, improvements, betterments,
renewals, substitutions, and replacements of, for, or to any of the Collateral,
wherever located, together with the products, proceeds, issues, rents, and
profits thereof and any replacements, additions, or accessions thereto or
substitutions thereof, and all rights in or under insurance policies and to the
proceeds of any insurance policies covering any of the
<PAGE>
other Collateral, all rights to unearned or refunded insurance premiums, and the
proceeds of any condemnation awards or any claims regarding any of the other
Collateral.
1.22 Commitment. The commitment letter relating to the $15,000,000 Bridge
Loan issued by Lender to Borrower, dated July 17, 1998, and accepted by Borrower
on July 17, 1998, attached hereto as Exhibit "J" and incorporated herein by this
reference; to the extent there is a conflict between the terms of the Commitment
and the terms of this Agreement, this Agreement shall govern.
1.23 Common Elements. The common areas and facilities as shown on the
Plans for each Applicable Resort, as defined or provided for in the Applicable
Declaration or other Applicable Timeshare Documents, including, without
limitation, the Land and all improvements thereto except for the Units that have
been dedicated to the condominium or comparable form of ownership, as well as
any limited common elements, as those terms are defined and used in the
Applicable Declaration.
1.24 Common Furnishings. All furniture, furnishings, fixtures,
appliances, carpeting, and equipment located in a Unit or elsewhere within an
Applicable Resort.
1.25 Construction Contract. The construction contract by and between an
Applicable Underlying Borrower and the General Contractor for a Qualified
Resort.
1.26 Construction Mortgage. A mortgage or deed of trust that creates a
valid and enforceable first priority Lien against the Mortgaged Real Property
identified therein (which Mortgaged Real Property shall be situated within an
Applicable Resort) and secures in part the payment of all principal, interest,
and other amounts owed by an Applicable Underlying Borrower to any Borrower,
pursuant to a Pledged Note Receivable and all related Applicable Underlying Loan
Documents.
1.27 Custodial Agreement. Collectively, that certain Custodial Agreement
and/or intercreditor or collateral agreement and among Lender, the applicable
Borrower and the participation lenders for each Applicable Underlying Loan as
set forth on Exhibit "D" attached hereto and incorporated herein by this
reference to the extent of each such lender's participation interest, and
Custodian, a copy of which is attached as Exhibit "A" hereto and incorporated
herein by this reference, pursuant to which Custodian will maintain custody of
all original Applicable Underlying Loan Documents and take certain actions in
connection therewith pursuant to the terms agreed to by and among Lender and the
applicable participation lenders for each Applicable Underlying Loan.
1.28 Custodian. U.S. Bank Trust National Association or such other Person
as Lender, and the other participation lenders for each Applicable Underlying
Loan, in their reasonable discretion, engage from time to time, at Borrower's
sole cost and expense, to maintain custody of all original Applicable Underlying
Loan Documents and take certain actions in connection therewith.
<PAGE>
1.28A Debbie Reynolds Resort. The Debbie Reynolds Resort located in Las
Vegas, Nevada.
1.29 Debbie Reynolds Resort First Mortgage Loan. A loan dated March 7,
1994 made by Bennett Management and Development Company to Debbie Reynolds Hotel
& Casino, Inc. and Hamlett Production, Ltd. in the original principal amount of
$2,500,000 which loan is secured by a first priority Mortgage and Security
Agreement on the Debbie Reynolds Resort located in Las Vegas, Nevada.
1.30 Debbie Reynolds Resort Third Mortgage Loan. A loan dated July 27,
1995, made by Bennett Funding International, Ltd., d/b/a Resort Funding, Inc. to
Debbie Reynolds Hotel & Casino, Inc. in the original principal amount of
$2,865,000 which loan is secured by a third priority Mortgage and Security
Agreement on the Debbie Reynolds Resort located in Las Vegas, Nevada. The Debbie
Reynolds Resort First Mortgage Loan and the Debbie Reynolds Third Mortgage Loan
are collectively referred to as the "Debbie Reynolds Resort Loans."
1.31 Debtor Relief Laws. Any applicable liquidation, conservatorship,
receivership, bankruptcy, moratorium, rearrangement, insolvency, reorganization,
or similar law, proceeding, or device providing for the relief of debtors from
time to time in effect and generally affecting the rights of creditors.
1.32 Default. An event or condition, the occurrence of which immediately
is or, with the lapse of time or the giving or notice or both, would become, an
Event of Default hereunder.
1.33 Default Rate. The Interest Rate plus four percent (4%) per annum;
provided, however, that the Default Rate shall in no event exceed the highest
interest rate permitted to be charged under any applicable usury laws.
1.34 Eastern. Eastern Resorts Corporation, a Delaware corporation, which
is a borrower hereunder.
1.34A Eastern, LLC. Eastern Resorts Company, LLC, a Rhode Island limited
liability company, which is a borrower hereunder.
1.35 Eligible Note Receivable. With respect to any Borrower, a Pledged
Note Receivable that satisfies each of the following criteria:
(a) The Applicable Underlying Loan that it evidences was
originated by such Borrower in the ordinary course of its business;
(b) Advances by such Borrower under such Note Receivable have been
previously used by the Applicable Underlying Borrower solely for purposes of
acquiring, developing, constructing, improving, or providing working capital in
connection with, a
<PAGE>
Qualified Resort, and no further Advances required by Borrower under such Note
Receivable;
(c) The Applicable Underlying Loan Documents have been approved in
writing by Lender;
(d) Such Borrower is the sole payee (subject to the rights of
participation lenders in certain Applicable Underlying Loans as set forth on
Exhibit "D" hereto);
(e) It is secured by an Inventory Mortgage and/or a Construction
Mortgage;
(f) Principal and interest payments on it are payable to such
Borrower in legal tender of the United States;
(g) It provides for the payment to such Borrower of interest at
the minimum floating rate of (i) the Libor Rate plus 3.5% per annum; or (ii) the
Prime Rate plus 1.0% per annum, in each case redetermined no less frequently
than quarterly;
(h) Neither the Applicable Underlying Borrower nor the Applicable
Underlying Guarantor, if any, is an Affiliate of Borrower;
(i) The Applicable Underlying Loan Documents provide for
accelerated partial releases from the Lien of the Applicable Mortgage that are
no less than one hundred ten percent (110%) of the Applicable Underlying
Borrower's cost basis in the Unit or Interval being released;
(j) It requires such minimum amortization of principal as Lender,
has approved;
(k) No monthly installment or other amount due with respect to the
Note Receivable (except for the Debbie Reynolds Resort Loans) is more than
thirty (30) days' contractually past due at the time of its pledge to Lender
hereunder, and no such monthly installment becomes more than sixty (60) days'
contractually past due thereafter;
(l) Neither the Applicable Underlying Borrower nor the Applicable
Underlying Guarantor, if any, has any claim against Borrower or any Affiliate
thereof, and no defense, set-off, or counterclaim exists with respect to the
Note Receivable at the time of any Advance in respect thereof;
(m) The original of the Note Receivable and all related documents
and instruments, the terms of each of which shall comply fully with all
Applicable Laws, have been endorsed in the manner prescribed by Lender and
delivered to the Custodian as provided for in this Agreement and in the
Custodial Agreement; and
<PAGE>
(n) The Financed Improvements at the Qualified Resort are fully
completed as evidenced by appropriate certificate(s) of occupancy or use.
1.36 Encumbered Interval. Any Interval that is encumbered by the Lien of
an Inventory Mortgage, whether or not the applicable mortgagee has executed a
non-disturbance or subordination agreement in connection therewith.
1.37 Encumbered Personal Property. All furniture, furnishings, fixtures,
appliances, equipment, inventory, supplies, accounts, chattel paper, and general
intangibles at any time located at, arising out of the use of, and/or used or
useful in connection with the management or operation of any Mortgaged Real
Property or Encumbered Interval, whether now owned or hereafter acquired by
Borrower or an Applicable Underlying Borrower, together with all improvements
and accessions thereto and replacements thereof and the cash and non-cash
proceeds thereof, a Lien against which constitutes Applicable Underlying Loan
Collateral for a Pledged Note Receivable.
1.38 Environmental Laws. The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time ("CERCLA"),
the Resource Conservation and Recovery Act of 1976, as amended from time to time
("RCRA"), the Superfund Amendments and Reauthorization Act of 1986, as amended,
the federal Clean Air Act, the federal Clean Water Act, the federal Safe
Drinking Water Act, the federal Toxic Substances Control Act, the federal
Hazardous Materials Transportation Act, the federal Emergency Planning and
Community Right to Know Act of 1986, the federal Endangered Species Act, the
federal Occupational Safety and Health Act of 1970, the federal Water Pollution
Control Act, and any and all comparable statutes or ordinances enacted in an
Applicable Jurisdiction, as all of the foregoing laws may be amended from time
to time, and any rules or regulations promulgated pursuant to the foregoing;
together with any similar local, state or federal statutes, ordinances, rules,
or regulations, either in existence as of the date hereof or enacted or
promulgated after the date of this Agreement, that concern the management,
control, storage, discharge, treatment, containment, removal, and/or transport
of Hazardous Materials or other substances that are or may become a threat to
public health or the environment; together with any common law theory involving
Hazardous Materials or substances that are (or alleged to be) hazardous to human
health or the environment, based on nuisance, trespass, negligence, strict
liability, or other tortious conduct, or any other federal, state, or local
statute, ordinance, regulation, rule, policy, or determination pertaining to
health, hygiene, the environment, or environmental conditions.
1.39 Equivest. Equivest Finance, Inc., a Florida corporation, which is a
Borrower hereunder.
1.40 Event of Default. Defined in Section 7 of this Agreement.
1.41 Financed Improvements. All Units, Common Elements, and other
buildings, structures, recreational facilities, and appurtenances thereto
located on any Mortgaged
<PAGE>
Real Property which are fully complete and were constructed with the proceeds of
advances by the applicable Borrower with respect to an Applicable Underlying
Loan.
1.42 Financial Statements. The tax returns, balance sheets, and
statements of income and expense of any Borrower and the related notes and
schedules delivered by Borrower prior to the Closing Date; and the quarterly and
annual financial statements and reports required to be provided to Lender
pursuant to Section 6.1(g) hereof.
1.43 GAAP. Generally accepted accounting principles, applied on a
consistent basis, as described in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board which are applicable under the
circumstances as of the date in question.
1.44 General Contractor. A licensed general contractor in an Applicable
Jurisdiction approved by any Borrower.
1.45 Hazardous Materials. "Hazardous substances," "hazardous waste,"
"hazardous constituents," "toxic substances," or "solid waste," as defined in
the Environmental Laws, and any other contaminant or any material, waste, or
substance that is petroleum or petroleum based, asbestos, polychlorinated
biphenyls, flammable explosives, or radioactive materials.
1.46 Interest Rate. The Base Rate plus 3.00% per annum. The Interest Rate
charged for each one (1) month period during the term of the Loan shall be fixed
based upon the Base Rate published or otherwise determined prior to and in
effect as of the third (3rd) Business Day following the tenth (10th) day of each
calendar month. The Interest Rate shall be calculated based on a 360 day year
and charged for the actual number of days elapsed.
1.47 Interval. An undivided fee simple timeshare interest in a particular
Unit or in an entire Applicable Resort as a whole, as a tenant in common with
other owners of undivided interests in such Unit or Applicable Resort, or a
lease, license, or other form of "right-to-use" timeshare interest, together
with all rights, benefits, privileges, and interests appurtenant thereto,
including but not limited to the right to use and occupy a Unit within the
Applicable Resort and the Common Elements and Common Furnishings appurtenant to
such Unit and/or the Applicable Resort during a reserved or assigned use period,
all as more specifically described in the Applicable Declaration.
1.48 Inventory Mortgage. A mortgage or deed of trust that creates a valid
and enforceable first priority (except in the case of the Debbie Reynolds Resort
Loans) Lien against the Encumbered Intervals identified therein (which
Encumbered Intervals relate to an Applicable Resort) and secures in part the
payment of all principal, interest, and other amounts owed by an Applicable
Underlying Borrower to a Borrower, pursuant to a Pledged Note Receivable and all
related Applicable Underlying Loan Documents.
<PAGE>
1.48A Irish Resorts. Killarney Country Club and Old Killarney Village.
1.49 Land. The real property upon which any of the Financed Improvements
or other portions of an Applicable Resort are situated.
1.50 Lien. Any mortgage, security interest, or other interest in property
securing an obligation owed to, or valid claim by, a Person other than the owner
of such property, whether such interest arises in equity or is based on common
law, statute, or contract.
1.51 Loan. The loan facility in the maximum principal amount of
$15,000,000 as described in this Agreement and evidenced and secured by the Loan
Documents.
1.52 Loan Documents. Collectively, the following documents and
instruments, as each may be amended, renewed, extended, restated, or
supplemented from time to time:
(a) This Agreement;
(b) The Note;
(c) Pledges and Assignments of Notes Receivable and Applicable
Mortgages (in the form of Exhibit "H," attached hereto and incorporated herein
by this reference) and all documents related to the Pledges and Assignments of
Notes Receivable and Applicable Mortgages;
(d) Assignments of the Underlying Guarantees;
(f) The Custodial Agreement;
(g) The Lockbox Agreement;
(h) The Warrant to Purchase Shares of Common Stock of Equivest
Finance, Inc.;
(i) The Amended and Restated Warrant to Purchase Shares of Common
Stock of Equivest Finance, Inc.;
(j) The Registration Rights Agreement;
(k) The Registration Rights Agreement (for the Amended and
Restated Warrant to Purchase Shares of Common Stock of Equivest Finance, Inc.)
<PAGE>
(l) UCC-1 financing statements covering the Collateral, to be
recorded in the appropriate public records of each Applicable Jurisdiction and
filed in the office of the Secretary of State of each Applicable Jurisdiction in
which any of the Collateral is located;
(m) Security Agreement and Collateral Assignment for Debbie
Reynolds Resort First Mortgage Loan and Debbie Reynolds Resort Third Mortgage
Loan;
(n) Pledge Agreement of all stock of Eastern in favor of Lender;
(o) Security Agreement for all assets of Eastern and Eastern, LLC
in favor of Lender;
(p) Pledge and Security Agreement of all Membership interests of
Eastern, LLC in favor of Lender;
(q) Contribution Agreement; and
(r) All such other assignments, agreements, documents, instru
ments, certificates, and materials as Lender may require in order to evidence or
secure the Obligations, to evidence and perfect the rights, Liens, and security
interests of Lender contemplated by the Loan Documents, and otherwise to
effectuate the transactions contemplated hereby.
1.53 Lockbox Agent. M&T Consolidated Trust [?] or such other Person as
Lender may decide to engage, in its sole discretion, at Borrower's sole cost and
expense, to receive, deposit, and disburse all amounts paid by or on behalf of
each Applicable Underlying Borrower in accordance with the terms, provisions,
and conditions hereof, of the Lockbox Agreement, and of the Applicable
Underlying Loan Documents.
1.54 Lockbox Agreement. That certain agreement by and among Lender,
Borrower, and Lockbox Agent in substantially the form of Exhibit "B," attached
hereto and incorporated herein by this reference, pursuant to which Lockbox
Agent may be engaged, at Borrower's sole cost and expense, to receive, deposit,
and disburse all amounts paid by or on behalf of each Applicable Underlying
Borrower and each Applicable Underlying Guarantor in accordance with the terms,
provisions, and conditions hereof, of the Lockbox Agreement, and of the
Applicable Underlying Loan Documents.
1.55 Long Wharf Loan. The $6,000,000 mortgage and $5,500,000 receivables
loan made by Lender to Eastern Resorts LLC, a Rhode Island limited liability
company, as of the date hereof as evidenced in part by that certain Loan and
Security Agreement of even date herewith with respect to the Long Wharf
Timeshare Resort located in Newport, Rhode Island.
<PAGE>
1.56 Maturity Date. The Loan shall mature and be payable in full on the
earlier to occur of (i) the closing of a registered public offering of common
stock of Equivest or an Affiliate of any Borrower; or (ii) December 11, 1998.
1.57 Minimum Net Worth Requirement. Equivest's minimum consolidated
Tangible Net Worth of not less than $20,000,000, and Equivest's minimum Net
Worth of not less than $35,000,000.
1.58 Minimum Quarterly Net Income Requirement. The pre-tax quarterly
consolidated net income of Equivest, determined in accordance with GAAP,
consistently applied, (without taking into consideration any amounts paid or
payable to any Borrower from any Affiliate of such Borrower), of not less than
$2,500,000 for the three (3) month period from September 1, 1998, through
November 30, 1998 and for each subsequent three (3) month period thereafter
during the term of the Loan.
1.59 Mortgaged Real Property. All of each Borrower's right, title, and
interest in and to any Land, Unit, Common Element, Interval, and other real
property of any and every type, together with all easements and other
appurtenances thereto, that is encumbered by the Lien of a Construction Mortgage
or an Inventory Mortgage and located within an Applicable Resort.
1.60 Net Worth. With respect to any Borrower, the excess of total assets
of such Borrower, on a consolidated basis, as determined in accordance with GAAP
less all assets of Borrower which reflect obligations or amounts due or payable
to any Borrower from any Affiliate of Borrower, over total liabilities of such
Borrower without taking into account any payables or receivables due among
Borrowers or any Affiliates of Borrowers as determined in accordance with GAAP.
1.61 Note. That certain Promissory Note that evidences the Loan, dated as
of the Closing Date, made and executed by Borrower to the order of Lender and
delivered to Lender concurrently with Borrower's execution of this Agreement.
1.62 Note Receivable. With respect to any Borrower, a promissory note
that is now or hereafter made and executed by an Applicable Underlying Borrower
to the order of such Borrower, evidences an Applicable Underlying Loan, and is
secured in part by an Inventory Mortgage and/or a Construction Mortgage.
1.63 Obligations. All present and future indebtedness, liabilities,
obligations, and responsibilities, both financial and otherwise, to which
Borrower is subject under any of the Loan Documents, whether direct or indirect,
absolute or contingent, including but not limited to all amounts due or becoming
due to Lender in respect of the Loan or any of the Loan Documents, including
principal, interest, prepayment premiums, contributions, taxes, insurance
premiums, loan charges, custodial fees, attorneys' and paralegals' fees and
expenses and other fees or expenses incurred by Lender or advanced to or on
behalf of Borrower by Lender, pursuant to any of the Loan Documents or in
connection with
<PAGE>
Lender's enforcement of the prompt and complete payment and performance by
Borrower of all indebtedness, liabilities, obligations, and responsibilities
owed by Borrower, pursuant to this Agreement, any of the other Loan Documents,
or otherwise.
1.64 Permitted Liens and Encumbrances. Those liens and encumbrances
affecting all or a portion of the Collateral or any Applicable Underlying Loan
Collateral to which Lender consents in writing, as set forth on Exhibit "C"
attached hereto and incorporated herein by this reference, as amended or
restated from time to time, including without limitation, (i) the Liens more
particularly described in Section 6.3(l) hereof, (ii) real estate tax liens and
the second priority mortgage encumbering the Debbie Reynolds Resort in Las
Vegas, Nevada, and (iii) the holders of participation interests in certain
Pledged Notes Receivable as set forth on Exhibit "D" attached hereto.
1.65 Person. A natural person, corporation, partnership, limited
liability company, joint venture, association, estate, trust, government,
governmental subdivision or agency, other legal entity, or any combination
thereof.
1.66 Phase I Environmental Inspection. A Phase I environmental assessment
of an Applicable Resort, excluding the Debbie Reynolds Resort Loans and the
Irish Resorts, including, without limitation, the relevant Land and all
improvements thereto. In the event that any Phase I Environmental Assessment of
an Applicable Resort is unacceptable to Lender for any reason or is not
available, Borrower shall provide Lender with at least two (2) copies of a
written report covering such Applicable Resort, prepared by one (1) or more
appropriate licensed professionals acceptable to Lender, which confirm(s):
(a) The absence of any Hazardous Materials of any kind or nature
at the Applicable Resort, except for commercially reasonable amounts thereof
commonly found at residential and resort properties in the Applicable
Jurisdiction; and
(b) That the applicable engineering firm has obtained, reviewed,
and included within its report a CERCLIS printout from the Environmental
Protection Agency (the "EPA"), statements from the EPA and other applicable
state and local authorities, and such other information as Lender may reasonably
require, all of which information shall confirm that there is no known or
suspected hazardous or toxic waste located at the Applicable Resort or in such
proximity thereto as to create a material risk of contamination of all or any
portion of the Collateral or any Applicable Underlying Loan Collateral.
1.67 Plans. Except for the Debbie Reynolds Resort, Plans for the
development and construction of any Financed Improvements, together with all
specifications and drawings in respect thereof and all modifications,
amendments, additions, and supplements thereto. Said Plans, which shall be
prepared by an Architect, shall indicate the location of the Financed
Improvements, the configuration and dimensions of the Applicable Resort, the
means of access thereto, street lines, easements, the Common Elements, and other
relevant details.
<PAGE>
1.68 Pledged Note Receivable. A Note Receivable that has been and remains
pledged to Lender by any Borrower, pursuant to this Agreement or any of the
other Loan Documents.
1.69 Prime Rate. The prime or reference rate of interest as announced or
published from time to time by Chase Manhattan Bank, N.A. If such bank shall,
for any period, cease to announce or publish its prime or reference rate, then
Lender shall, during such period, determine the Prime Rate based upon the prime
rates announced or published by such other bank as is reasonably acceptable to
Borrower.
1.70 Qualified Borrower. The developer of an interval ownership,
condominium, timeshare, or vacation ownership project, the creditworthiness for
an acquisition, development, and/or construction loan and other qualifications
of which have been approved by Lender. A listing of each Qualified Borrower
which is the borrower under an Applicable Underlying Loan is set forth on
Exhibit "D" attached hereto and incorporated herein by this reference. No Person
shall be deemed a Qualified Borrower hereunder unless and until Lender has so
designated such Person in writing.
1.71 Qualified Loan. An acquisition, development, construction,
inventory, or working capital loan made by any Borrower to a Qualified Borrower
in connection with a Qualified Resort and approved by Lender, each of which
loans are specifically listed on Exhibit "D" attached hereto and incorporated
herein by this reference.
1.72 Qualified Resort. An interval ownership, condominium, timeshare
project, and/or vacation ownership project each of which such resorts are listed
on Exhibit "D" attached hereto and incorporated herein by this reference,
consisting of, among other things, certain Land, Units, Common Elements, and
Intervals, whether now existing or hereafter added, in one (1) or more buildings
or phases, and all related Common Furnishings, easements, licenses, rights,
interests, and other appurtenances, as more fully described in the Applicable
Declaration and the other Applicable Timeshare Documents, as the same may be
amended from time to time.
1.73 Release Fee. Any fee or amount required to be paid by an Applicable
Underlying Borrower to any Borrower in consideration for the release of all or a
portion of any Applicable Underlying Loan Collateral from the Lien of a
Construction Mortgage or an Inventory Mortgage or any other Lien in favor such
of Borrower. For purposes of this Agreement, the term "Release Fee" shall
include any other payments, however denominated, required to be made by an
Applicable Underlying Borrower to any Borrower upon the sale of an Interval at
an Applicable Resort, pursuant to the Applicable Underlying Loan Documents.
1.74 Resort Funding. Resort Funding, Inc., a Delaware corporation, which
is a Borrower hereunder.
<PAGE>
1.75 Servicing Agent. Lender may engage, at its sole cost and expense, a
Person to monitor the Collateral and the Borrower and to perform certain other
duties on behalf of Lender in connection with the Loan which Person shall be the
"Servicing Agent." If engaged, Servicing Agent shall service each Applicable
Underlying Loan, which shall include but not be limited to the collection of
Release Fees and all other amounts owed Borrower by the Applicable Underlying
Borrower, pursuant to the Applicable Underlying Loan Documents, subject to the
terms, provisions, and conditions of Section 2 hereof and of the Servicing
Agreement and the Lockbox Agreement.
1.76 Servicing Agreement. An agreement by and among Lender, Borrower, and
Servicing Agent (if different from Borrower) in substantially the form of
Exhibit "E," attached hereto and incorporated herein by this reference, that
provides for the servicing of each Applicable Underlying Loan.
1.77 Survey. An as-built survey of an Applicable Resort as defined in
Section 4.2(d)(iv) of this Agreement.
1.78 Tangible Net Worth. The excess total assets of Equivest, on a
consolidated basis, as determined in accordance with GAAP less all assets of
Equivest which would be classified as non-identifiable intangible assets under
GAAP, including, without limitation, good will, and (ii) all assets of Equivest
(on a consolidated basis) which reflect obligations or amounts due or payable to
any Borrower from any Affiliate of Borrower, over total liabilities of Equivest
(on a consolidated basis), as determined in accordance with GAAP.
1.79 Timeshare Construction Credit Facility. The $30,000,000 timeshare
construction credit facility as evidenced in part by that certain Loan and
Security Agreement, dated as of November 14, 1997, by and among Resort Funding,
Equivest and Lender.
1.80 Timeshare Receivables Hypothecation Facility. The $75,000,000
timeshare receivables hypothecation facility as evidenced in part by that
certain Loan and Security Agreement, dated as of February 11, 1998, by and among
Resort Funding, Equivest and Lender.
1.81 Timeshare Receivables Purchase Facility. The $75,000,000 timeshare
receivables credit facility as evidenced in part by that certain Assignment,
Release and Custodial Agreement dated on or about November 13, 1997, by and
among Lender, Resort Funding, BFICP Corporation, ING (U.S.) Capital Corporation,
ING (U.S.) Capital Markets, Inc., Holland Limited Securitization, Inc., First
Trust of New York, N.A., and Concord Servicing Corporation, together with any
and all related contemporaneous or subsequent transactions involving Lender and
Equivest, among other parties.
1.82 Underlying Guaranty. A document or instrument executed by an
Applicable Underlying Guarantor and delivered to the applicable Borrower,
pursuant to which one (1) or more Persons guarantees the absolute and
unconditional payment and performance of
<PAGE>
the Applicable Underlying Loan and all amounts secured by or under the
Applicable Underlying Loan Documents. The term "Underlying Guaranty" shall
further include any document or instrument executed by an Applicable Underlying
Guarantor and delivered to such Borrower, pursuant to which the completion of
construction of certain Improvements in accordance with the relevant Plans and
all Applicable Laws is guaranteed.
1.83 Unit. An apartment, condominium unit, or other structure that is
affixed to real property and designed and available, pursuant to applicable law,
for use and occupancy as a vacation residence by one (1) or more individuals,
together with all related Common Elements, Common Furnishings, easements, and
other appurtenances thereto.
1.84 Warrants. The warrants in Equivest issued by Equivest to Lender
concurrent with Borrower's acceptance of the Commitment, pursuant to that
certain Warrant to Purchase Shares of Common Stock of Equivest Finance, Inc., in
the form of Exhibit "F," attached hereto and incorporated herein by this
reference.
SECTION 2. THE LOAN
Lender hereby agrees to make the Loan in accordance with all of the
terms, provisions, and conditions hereof and of the other Loan Documents.
2.1 Purposes. The proceeds of the Loan shall be used exclusively to
acquire 100% of the outstanding capital stock and interests of Eastern Resorts
Corporation, a Rhode Island corporation, in a transaction in which a
wholly-owned subsidiary of Equivest will merge with Eastern Resorts Corporation
(R.I.) for consideration consisting of $15,000,000 in cash and 3,200,000 shares
of Equivest common stock (the "Transaction"). Borrower represents and warrants
to its best knowledge that the Transaction is scheduled to close no later than
September 30, 1998.
2.2 Intentionally Omitted.
2.3 Single Advance. The original principal amount of the Loan shall be up
to a maximum of $15,000,000 which will be advanced as a single Advance as of the
Closing Date. Lender shall have no obligation to make any other advances,
readvances or further loans hereunder to Borrower other than the Advance
detailed in the preceding sentence.
2.4 Interest Rate. The aggregate principal amount of the Loan that are
outstanding from time to time shall bear interest at a rate equal to the
Interest Rate. The average monthly outstanding principal balance of the Loan
shall bear interest in arrears as of Lender's wiring of funds through its actual
receipt of repayment of the Loan (if received by Lender later than 12 noon, New
York City time, then interest accrual shall be through the next Business Day
following such receipt). Immediately upon the occurrence of an Event of Default,
any and all principal and other amounts owed Lender hereunder or pursuant to the
Note or any of the other Loan Documents may, in Lender's sole discretion, bear
interest at the Default Rate.
<PAGE>
2.5 Payments. Borrower agrees punctually to pay or cause to be paid to
Lender, via wire transfer, all principal and interest due under the Note or
otherwise in respect of the Loan:
(a) Monthly. Borrower shall pay, in arrears, on or before the
eleventh (11th) day of each calendar month (each such day is hereinafter
referred to as a "Payment Date"), commencing on September 11, 1998, the total
amount of all cash funds received by Borrower since the immediately preceding
Payment Date arising out of the Applicable Underlying Loans (net of amounts owed
by Borrower to one or more participation lenders for each Applicable Underlying
Loan as set forth on Exhibit "D" hereto) including, but not limited to, all of
the cash flow funds consisting of principal (including Release Fees) and
interest payments, sales proceeds or refinancing proceeds. Such payments shall
be applied first to reimbursable costs, second to interest, as calculated at the
Interest Rate, that has accrued on the outstanding principal balance of the Note
during the period of time commencing on the eleventh (11th) day of the
immediately preceding calendar month and terminating on the tenth (10th) day of
the subject calendar month (the "Accrual Period"), and third to unpaid principal
balance of the Loan. If the eleventh (11th) day of a particular calendar month
is not a Business Day, then such month's Payment Date shall be the immediately
succeeding Business Day. Borrower shall further pay Lender such additional
amounts hereunder as are set forth in the Loan Documents, at the times and in
the manner specified herein. In Lender's sole discretion, immediately upon
notice to each Borrower by Lender, all such amounts described above in this
subsection 2.5(a) shall be paid directly by the applicable Borrower to an
independent Lockbox Agent acceptable to Lender. Borrower shall be obligated to
pay all of the fees and expenses of any such Lockbox Agent.
(b) Partial Releases. Under no circumstances shall Borrower
execute and deliver any partial releases from the Lien of an Applicable Mortgage
unless and until the Release Fee that corresponds to the Unit or Interval in
question, pursuant to the Applicable Underlying Loan Documents, has been paid to
and received by Borrower, or, if applicable, Lockbox Agent or if a default or
event of default has occurred under such Applicable Underlying Loan Documents.
Lender shall not be responsible for any of the costs incident to the preparation
and recording of partial releases.
(c) Final Payment. Notwithstanding any term, provision, or
condition hereof to the contrary, the entire outstanding principal balance of
the Loan, together with any and all accrued but unpaid interest thereon and all
other Obligations, shall immediately be paid via wire transfer by Borrower to
Lender and otherwise be satisfied in full on or before the earlier to occur of
(i) the occurrence of an Event of Default hereunder; or (ii) the Maturity Date.
2.6 Prepayments. Borrower may prepay the Loan, in whole or in part,
without premium or penalty, at any time, in its sole discretion.
2.7 Intentionally Omitted.
<PAGE>
SECTION 3. COLLATERAL
3.1 Grant of Security Interest. To secure the prompt and complete payment
and performance when due of all of the Obligations, for value received, each
Borrower hereby unconditionally and irrevocably assigns, pledges, and grants to
Lender a continuing first priority Lien and security interest in and to the
Collateral.
3.2 Security Interest in All Pledged Notes Receivable. Lender shall have
a continuing first priority Lien and security interest in and to all of the
Pledged Notes Receivable and may collect and shall receive all payments payable
to Borrower in respect of all Pledged Notes Receivable.
3.3 Financing Statements. Borrower agrees, at its own expense, to execute
the UCC-1 financing statements provided for by the Code, together with any and
all other appropriate instruments and documents, and to take such other action
as may be required to perfect and to continue the perfection of Lender's first
priority Liens and security interests in the Collateral. In addition, unless
prohibited by law, Borrower hereby authorizes Lender to execute and file any
such financing statements on Borrower's behalf.
3.4 Location of Collateral. Except for Encumbered Personal Property that
is replaced or under repair in the ordinary course of business, all tangible
Collateral (other than Collateral delivered to Lender or Custodian) shall
remain, at all times, within the Applicable Resort at which it is located on the
Closing Date, and Borrower may not transfer or cause the transfer of any such
Collateral from such premises without the prior written approval of Lender.
3.5 Protection of Collateral; Reimbursement. The portion of the
Collateral consisting of (a) the original Pledged Notes Receivable; (b) the
original Applicable Mortgages; and (c) all other original Loan Documents shall
be delivered, at Borrower's expense, to Custodian at its designated address and
held in Custodian's possession, custody, and control subject to the terms of the
Custodial Agreement approved by Lender until all of the Obligations have been
fully satisfied. Each original Pledged Note Receivable delivered to Custodian
shall indicate in a manner acceptable to Lender, Lender's interest in such
Pledged Note Receivable. The portion of the Collateral delivered to Custodian as
described above shall be segregated by Custodian and stored in a secure,
fire-resistant filing cabinet, access to which is limited in a commercially
reasonable manner. Borrower agrees that such storage is and shall be deemed to
constitute reasonable care with respect to such Collateral. Except to the extent
expressly included in the Custodian's fee as set forth in the Custodial
Agreement, all insurance and other expenses of protecting the Collateral,
including, without limitation, storing, warehousing, insuring, handling,
maintaining, and shipping the Collateral, and any and all excise, property,
intangible, sales, and use taxes imposed by any state, federal, or local
governmental authority on any of the Collateral or in respect of the sale
thereof shall be paid by Borrower. Any and all other amounts for which Borrower
may become liable hereunder and all costs and expenses (including attorneys' and
paralegals' fees, legal expenses, and court costs) that Lender
<PAGE>
may incur in enforcing or protecting its Lien on, or rights and interest in, the
Collateral or any of its rights or remedies under this Agreement or any other
Loan Document or in respect to any of the transactions to be had hereunder or
thereunder, until paid by Borrower to Lender with interest at the Default Rate,
shall be included among the Obligations and, as such, shall be secured by all of
the Collateral. Provided that Custodian retains the original Pledged Notes
Receivable and Applicable Mortgages delivered to it in a secure, fire-resistant
filing cabinet as provided above, Lender shall not be liable or responsible in
any way for the safekeeping of any of the Collateral or for any loss or damage
thereto or for any diminution in the value thereof, or for any act or default of
any warehouseman, carrier, forwarding agency, Lockbox Agent, Custodian, or any
other Person whomsoever.
3.6 Cross-Collateralization and Default. The Collateral shall secure all
of the Obligations as well as Borrower's obligations pursuant to the Timeshare
Receivables Purchase Facility, the Timeshare Construction Credit Facility, the
Timeshare Receivable Hypothecation Facility, the Long Wharf Loan and all Liens,
pledges, assignments, mortgages, security interests, and collateral granted to
or for the benefit of Lender pursuant thereto or any other related documents or
instruments shall also secure the Obligations. Any collateral including, without
limitation, all Liens, pledges, assignments, mortgages or security interest
granted to or for the benefit of Lender pursuant to the Timeshare Receivables
Purchase Facility, the Timeshare Construction Credit Facility and the Timeshare
Receivables Hypothecation Loan Facility and the Long Wharf Loan shall secure
Borrower's Obligations pursuant to this Loan as well as Borrower's obligations
pursuant to each of the above-referenced facilities. In addition, the Loan and
the Timeshare Receivables Purchase Facility, the Timeshare Construction Credit
Facility, the Timeshare Receivables Hypothecation Facility and the Long Wharf
Loan shall be cross- defaulted such that any event of default with respect to
the Timeshare Receivables Purchase Facility, the Timeshare Construction Credit
Facility, the Timeshare Receivables Hypothecation Facility or the Long Wharf
Loan shall constitute an Event of Default hereunder, and vice versa.
SECTION 4. CONDITIONS PRECEDENT TO CLOSING
The obligation of Lender to enter into this Agreement and to make the
Advance shall be subject to the complete satisfaction of each of the conditions
precedent set forth in the Commitment, in addition to all of the conditions
precedent set forth below and elsewhere in the Loan Documents:
4.1 The Loan. On or prior to the Closing Date:
(a) Execution and Delivery. Borrower shall execute and cause to be
notarized, witnessed, and attested, as appropriate, and delivered to Lender the
Loan Documents, together with such additional documents and certifications as
Lender and its counsel may reasonably require in order to ensure that all
conditions precedent to the closing of the Loan and the making of the advance
hereunder have been satisfied in all respects.
<PAGE>
(b) Opinion of Borrower's Counsel(s). Lender shall have received
from duly licensed counsel or counsels for Borrower acceptable to Lender such
legal opinions in form and substance satisfactory to Lender, dated as of the
Closing Date, as may be required by Lender, in its reasonable discretion.
(c) Representations, Warranties, Covenants, and Agreements. The
representations and warranties contained in the Loan Documents and in any
certificates delivered to Lender in connection with the closing shall be true
and correct in all material respects, and all covenants and agreements required
to have been complied with and performed by Borrower shall have been fully
complied with and performed to the satisfaction of Lender.
(d) No Prohibitions. Borrower shall not have taken any action or
permitted any condition to exist that would have been prohibited by any
provision of this Agreement or the Commitment.
(e) Borrower's Background Documents. Borrower shall have delivered
to Lender, and Lender shall have approved each of the following:
(i) Borrower's Organizational Documents. Copies of each
Borrower's organizational documents, including but not limited to their
respective articles of incorporation and bylaws, together with any amendments
thereto, certified to be true and complete by the respective Secretaries of each
Borrower.
(ii) Good Standing Certificates. Current good standing
certificates for each Borrower in each state where a Borrower is qualified or
where qualification is required.
(iii) Resolutions. Certified resolutions of each Borrower's
board of directors authorizing the execution of all Loan Documents and the
performance of all Obligations thereunder in form and substance satisfactory to
Lender.
(iv) Incumbency. A certificate from each Borrower, signed
by a duly authorized officer of such Borrower, dated as of the date of this
Agreement, as to the incumbency, authority and signatures of the officers of
such Borrower authorized to sign, on behalf of such Borrower, this Agreement and
the Loan Documents to which such Borrower is a party.
(f) Financial Statements. Lender shall have received and approved
the Financial Statements required pursuant hereto to be delivered to Lender, or
otherwise required by Lender, for each Borrower, all in form and substance
satisfactory to Lender.
(g) Proceedings Satisfactory. All actions taken in connection with
the execution and delivery of the Loan Documents, and all documents and papers
related thereto, shall be completely satisfactory to Lender and its counsel.
Lender and its counsel
<PAGE>
shall have received copies of all such documents and papers as Lender or its
counsel may reasonably request in connection therewith, all in form and
substance satisfactory to Lender and its counsel, in their sole discretion.
(h) Expenses. Borrower shall have paid all fees, expenses, and
other amounts required to be paid prior to or on the Closing Date, pursuant to
this Agreement or the Commitment.
(i) Monthly Reporting Package. Borrower shall have submitted to
Lender by July 31, 1998, for approval a proposed form of monthly reporting
package and the approval of a monthly reporting package form by Lender shall be
a condition precedent to closing.
(j) Recorded Documents. All of the conditions set forth in the
Commitment, this Agreement, and the other Loan Documents have been fully
satisfied by Borrower, including but not limited to the proper recordation of
the Pledges and Assignments of Notes Receivable and Applicable Mortgages and
other Loan Documents in the Applicable Jurisdictions and the filing of all
appropriate UCC-1 financing statements in accordance with the provisions of the
Code, this Agreement, and the other Loan Documents (or the deposit of all such
documents and instruments in escrow with the Title Insurance Company, if
appropriate).
(k) Applicable Laws. Lender has received evidence satisfactory to
Lender that the Applicable Resort, the Applicable Underlying Loan Collateral,
and the Applicable Underlying Borrower are in compliance with all Applicable
Laws.
(l) Payments by Lender. Lender may, at any time and without a
request therefor having been submitted by Borrower, advance Loan proceeds for
the purpose of paying interest on the Loan, real estate taxes, insurance
premiums, fees and expenses of Lender's counsel, or to cure an Event of Default.
After the occurrence of an Event of Default or of an event or the existence of a
condition which, with the giving of notice or the lapse of time or both, would
constitute an Event of Default hereunder, Lender may, as to an Applicable
Underlying Loan, make payments directly to any General Contractor, any
subcontractor, or any other party that has supplied labor, material, or services
in connection with or incidental to the construction of any of the Financed
Improvements, or for the payment of other costs set forth in the applicable
construction budget or the cost of any of Borrower's undertakings pursuant to
the Loan Documents. Notwithstanding the foregoing provisions of this Section
4.1(l) and except as otherwise provided herein to the contrary, Lender shall
furnish Borrower with written notice of Lender's intent to take any of the
foregoing actions and afford Borrower ten (10) days in which to take such
actions itself prior to Lender's doing so.
(m) Miscellaneous Conditions. With respect to each Applicable
Underlying Loan (i) the Financed Improvements shall have satisfactory access to
dedicated and completed streets unencumbered by Liens; (ii) the Applicable
Mortgage shall constitute a
<PAGE>
first priority Lien on the Mortgaged Real Property, the Encumbered Intervals (if
applicable), and such Financed Improvements with the exception of the Debbie
Reynolds Resort Loans; and (iii) except as otherwise specifically provided
herein to the contrary, there exists no Lien of any sort except for Permitted
Liens and Encumbrances, whether prior or inferior, other than the Lien of the
Applicable Mortgage with respect to the Mortgaged Real Property, Encumbered
Intervals, and such Financed Improvements, except for Liens with respect to
which an appropriate bond or other financial assurance that totally protects the
applicable Borrower's first priority Lien and right, title, and interest in and
to such Mortgaged Real Property, Encumbered Intervals, and Financed Improvements
has been issued, the inchoate Liens for property taxes not yet due and the
exceptions permitted by Lender in the Title Policy. Lender shall also be under
no obligation to make the Advance hereunder until Lender reasonably determines
that construction of the Financed Improvements for any Applicable Underlying
Loan is fully completed.
(n) No Adverse Change. Borrower shall be solvent and no material
adverse change shall have occurred in the financial condition of the Borrower,
which would in the good faith judgment of the Lender, materially impair the
ability of the Borrower to repay the Obligations.
(o) Lien Searches. Lender shall have received lien searches
satisfactory to it indicating that no liens on the Collateral exist as of
Closing except for Permitted Liens and Encumbrances.
(p) Insurance. Lender shall have been added as an "additional
insured" on insurance policies related to the Collateral or Borrower shall have
made and continue to make reasonable commercial efforts to add Lender as such an
"additional insured" and Lender shall have received title insurance commitments
satisfactory to it insuring Lender's interest in the Collateral.
(q) Eastern Merger. Eastern Resorts Corporation shall have
completed its merger with ERC Acquisition Corp., with ERC Acquisition Corp. as
the surviving corporation and ERC Acquisition Corp. shall have changed its
corporate name to Eastern Resorts Corporation. Borrower shall have provided
Lender with evidence satisfactory to Lender that such events have occurred.
(r) Business Plan. Lender shall have received two (2) copies of a
detailed memorandum provided by Borrower describing the plans for the
acquisition of Eastern and the anticipated public offering and other relevant
information required by Lender as well as a timetable for completion of each
item. Borrower represents and warrants that such plans are true, accurate and
complete in all material respects.
4.2 Applicable Underlying Loans. With respect to each Applicable
Underlying Loan, all of the following documents must be received and approved by
Lender prior to the Closing Date as follows:
<PAGE>
(a) Applicable Underlying Loan Documents. The Applicable
Underlying Borrower and the Applicable Underlying Guarantor have executed and
delivered to the applicable Borrower the Applicable Underlying Loan Documents.
(b) Title Policies. The Applicable Underlying Borrower has
delivered to the applicable Borrower an ALTA extended coverage lender's policy
of title insurance insuring in favor of such Borrower, together with its
successors and assigns, including but not limited to Lender, the first priority
of the Lien of the Applicable Mortgage upon the subject Mortgaged Real Property
and/or Encumbered Intervals (with the sole exception of the Debbie Reynolds
Resort Loans and the Irish Resorts; provided, however, an attorney's opinion
letter regarding the status of the filed Mortgage with respect to the Irish
Resorts must be provided or if not provided by Closing, Borrower shall provide
such ltter within ten (10) days after the Closing Date), without exception for
filed or unfiled mechanics' liens or claims or for matters that an accurate
survey would disclose, subject only to such exceptions and conditions to title
as such Borrower and Lender shall have approved in writing, including Permitted
Liens and Encumbrances on Exhibit "C" and such affirmative coverage as such
Borrower or Lender deems reasonably necessary prior to the Closing Date (the
"Title Policy"). Such policy shall be in an amount not less than the principal
amount of the applicable Note Receivable and be issued by a title insurance
company satisfactory to Borrower and Lender in all respects (the "Title
Insurance Company").
All such Title Policies contain such affirmative coverage as Lender deems
reasonably necessary, including but not limited to an affirmative statement that
the Title Policy insures the applicable Borrower, together with its successors
and assigns, including but not limited to Lender, against all mechanics' and
materialmen's liens arising from or out of construction of the Financed
Improvements and, to the extent available and commonly required by lenders in
the Applicable Jurisdiction, shall contain endorsements in form and content
acceptable to Lender: (A) insuring against matters that would be disclosed on an
accurate survey of the Land; (B) insuring that no building restriction or
similar exception to title disclosed on the Title Policy has been violated and
that any violation thereof would not create or result in any reversion,
reverter, or forfeiture of title; (C) a zoning endorsement in the form typically
issued in the Applicable Jurisdiction (or other appropriate evidence of proper
zoning in place of a zoning endorsement; and (D) insuring over any environmental
superlien or similar lien upon all or any portion of the Applicable Resort. The
condition of title to all Applicable Underlying Loan Collateral must be
satisfactory to Lender in all respects, in its sole discretion, as a condition
precedent to Lender's obligation to make the Advance hereunder in respect of the
Applicable Underlying Loan that is secured by Borrower's Lien in and to such
Applicable Underlying Loan Collateral.
(c) Opinions of Applicable Underlying Borrower's Counsel. The
applicable Borrower has received from counsel or counsels for the Applicable
Underlying Borrower and the Applicable Underlying Guarantor, licensed in the
Applicable Jurisdiction and acceptable to such Borrower and Lender, legal
opinions in form and substance satisfactory to such Borrower and Lender, dated
as of the date of closing of the Applicable Underlying Loan, covering such items
as may be required by such Borrower and Lender, including, without limitation,
that the Applicable Underlying Loan Documents are valid, binding, and
<PAGE>
enforceable in accordance with their terms and that the opinions are written in
favor of such Borrower and its successors or assigns.
(d) Applicable Underlying Borrower's Background Documents. Except
with respect to the Debbie Reynolds Resort Loans and the Irish Resorts, the
Applicable Underlying Borrower has delivered to the applicable Borrower and such
Borrower has approved each of the following:
(i) Applicable Underlying Borrower's Organizational
Documents. Copies of the Applicable Underlying Borrower's organizational
documents, including but not limited to its articles of incorporation, bylaws,
partnership agreement, and other relevant documents, as applicable, together
with any amendments thereto, certified to be true and complete by the Applicable
Underlying Borrower's Secretary or other authorized representative.
(ii) Good Standing Certificates. Current good standing
certificates issued by the appropriate Secretaries of State for the Applicable
Underlying Borrower and the Applicable Underlying Guarantor.
(iii) Resolutions. Certified resolutions of the Applicable
Underlying Borrower's and Applicable Underlying Guarantor's boards of directors
or general partners, as applicable, or such other evidence of authority as is
appropriate for the Applicable Underlying Borrower's and Applicable Underlying
Guarantor's form of business organization, authorizing the execution of all
Applicable Underlying Loan Documents and the performance of all obligations of
the Applicable Underlying Borrower and Applicable Underlying Guarantor
thereunder.
(iv) As-Built Survey. A copy of an "as-built" survey
satisfactory to Borrower and Lender prepared by a licensed surveyor satisfactory
to Borrower and the title insurance company which prepares the Title Policy, in
accordance with the Plans and showing all of the Units and other improvements in
place, certified to such Borrower, Lender and the Title Insurance Company, and
includes a narrative metes and bounds or platted description of the boundaries
of the Land, the area of the Land, and of the Financed Improvements and the
location and dimensions of all easements and Financed Improvements with the
exception of the Applicable Underlying Loan secured by the Pollard Brook Resort
in Lincoln, New Hampshire. The surveyor has included on the survey a signed
statement certifying the existence or a narrative statement certifying the
existence or nonexistence of any encroachment from or onto the Land and must
include the date of the survey and the surveyor's registration number and seal
and such other matters as the Title Insurance Company may require, in form and
substance satisfactory to such Borrower and the Title Insurance Company;
(v) Environmental Report. A Phase I environmental report or
reports covering the Applicable Resort, including all Mortgaged Real Property,
confirming (to the extent relevant, in Lender's reasonable discretion):
<PAGE>
(A) The absence of Hazardous Materials on, under, or
affecting the Land or any other real property or personal property comprising
the Applicable Resort, except for commercially reasonable amounts thereof
commonly found at residential and resort properties in the Applicable
Jurisdiction;
(B) That the engineering or environmental consulting
firm has obtained, reviewed, and included within its report a CERCLIS printout
from the Environmental Protection Agency (the "EPA"), statements from the EPA
and other applicable state and local authorities, and such other information as
such Borrower or Lender may reasonably require prior to the Closing Date,
including, without limitation, a Phase I Environmental Inspection, all of which
information shall confirm that there are no known or suspected Hazardous
Materials located at, used or stored on, or transported to or from the
Applicable Resort or in such proximity thereto as to create a material risk of
contamination of any the Applicable Underlying Loan Collateral, except for
commercially reasonable amounts thereof commonly found at residential and resort
properties in the Applicable Jurisdiction;
(C) The absence of friable asbestos within the
Units, Common Elements, or elsewhere at the Applicable Resort or, if asbestos is
found to be present in any part of the Applicable Resort, that such presence is
of a nature or magnitude that is able to be removed by a licensed removal
contractor for a guaranteed maximum sum satisfactory to such Borrower and
Lender.
(e) Evidence of Insurance. The applicable Borrower has received
certified copies of all insurance policies and endorsements thereto or other
evidence satisfactory to such Borrower and Lender, in the sole discretion of
each, relating to the Applicable Resort, including but not limited to the
Financed Improvements and the Encumbered Intervals. In addition, such Borrower
has received written evidence that the Applicable Underlying Borrower has
obtained and is maintaining all policies of insurance required by and in
accordance with Section 6.1(c) hereof, including but not limited to copies of
the most current paid insurance premium invoices for such policies.
(f) Applicable Laws. The applicable Borrower has received evidence
satisfactory to such Borrower and Lender, that as of the Closing Date all
existing Financed Improvements financed by such Borrower at the Applicable
Resort are fully completed and are in compliance with all applicable zoning,
building, and other Applicable Laws in connection with the construction,
development, establishment, and operation of the Applicable Resort and the sale,
use, marketing, and occupancy of Units and Intervals thereat.
(g) Litigation. The applicable Borrower has received evidence
satisfactory to such Borrower and Lender that there exists no pending or
threatened bankruptcy, foreclosure, or other material litigation or judgments
outstanding against or with respect to the Applicable Resort, all or any portion
of the Applicable Underlying Loan Collateral, the Applicable Underlying
Borrower, or the Applicable Underlying Guarantor (each a "Material
<PAGE>
Party"). The term "other material litigation" as used herein shall not include
matters (i) in which a Material Party is a plaintiff and no counterclaim is
pending; or (ii) such Borrower determines, in its sole discretion and Lender has
not notified such Borrower prior to the Closing Date in writing that it has
determined otherwise, in its sole discretion, that such litigation is immaterial
due to settlement, insurance coverage, frivolity, or amount or nature of claim.
The applicable Borrower shall have obtained an independent search, at such
Borrower's or the Applicable Underlying Borrower's expense, confirming that no
such bankruptcy, foreclosure action, or other material litigation or judgment
exists.
(h) Code/Other Searches. The applicable Borrower has obtained such
searches of the applicable public records as it deems necessary under all
Applicable Laws to verify that it has a first and prior perfected Lien and
security interest covering all of the Applicable Underlying Loan Collateral
owned by it (with the sole exception of the Debbie Reynolds Resort Loans).
(i) Taxes and Assessments. The applicable Borrower has received
evidence satisfactory to it that all real estate taxes and assessments owed by
or for which the Applicable Underlying Borrower or an owners' association is
responsible for collection have been paid and there is no exception for current
taxes on the Title Policy.
(j) Financial Statements. The applicable Borrower has received the
financial statements required by the Applicable Underlying Loan Documents to be
delivered to such Borrower, or otherwise required by Borrower, for the
Applicable Underlying Borrower and the Applicable Underlying Guarantor, all in
form and substance satisfactory to Borrower which are satisfactory to Lender in
its reasonable discretion.
(k) Appraisal. The applicable Borrower has received an appraisal
of the Applicable Resort, including but not limited to all real and personal
property contemplated to become Mortgaged Real Property, Encumbered Intervals,
or Encumbered Personal Property hereunder, prepared by a nationally recognized
appraisal firm and in form and content acceptable to such Borrower.
(l) Evidence of Completion. The applicable Borrower has received
evidence satisfactory to it confirming the completion of the Financed
Improvements substantially in accordance with the Plans and all Applicable Laws
and the approval of such completion by the applicable local governmental
authorities.
(m) Final Release of Lien. The applicable Borrower has received
(or the Title Insurance Company, in escrow) final and complete releases of Lien
executed by the General Contractor and all material subcontractors performing
work or supplying materials and paid for in connection with such Borrower's
final construction advance, in form and content acceptable to such Borrower,
together with any and all additional affidavits of all such parties, sufficient
in the opinion of such Borrower and Borrower's counsel to remove or insure over
any and all mechanics' and materialmen's Liens (inchoate or otherwise) affecting
the title to any of the Mortgaged Real Property, the Encumbered Intervals, or
the
<PAGE>
Financed Improvements, except for Liens with respect to which an appropriate
bond or other financial assurance that totally protects such Borrower's first
priority Lien (with the exception of the Debbie Reynolds Resort Loans) and
right, title, and interest in and to such Mortgaged Real Property, Encumbered
Intervals, and Financed Improvements has been issued.
(n) Non-Unit Improvements. The applicable Borrower has received
evidence satisfactory to it that all Financed Improvements required to be
constructed as identified on the Plans or as set forth in the Applicable
Timeshare Documents have been completed substantially in accordance with the
Plans and all Applicable Laws.
(o) As-Built Plans. The applicable Borrower has received a set of
detailed as-built Plans within one (1) month following the issuance of the
certificate(s) of occupancy (or the legal equivalent) with respect to the
Financed Improvements by the applicable governmental authority, which Plans must
be approved and identified as such in writing by the Applicable Underlying
Borrower, the Architect, and the General Contractor and must include Plans for
architectural, structural, mechanical, plumbing, electrical, and all site
development (including storm drainage, utility lines, and landscaping) work.
(p) Other Evidence. The applicable Borrower has received such
other evidence as Lender may reasonably request in writing to such Borrower
prior to the Closing Date in order to establish that the Financed Improvements
and their intended use comply with all applicable zoning and other Applicable
Laws.
(q) Interval Sales. To the extent applicable, the applicable
Borrower has received written evidence to the effect that the Applicable
Underlying Borrower has complied in all material respects with all Applicable
Laws relating to the marketing and sale of Intervals, including but not limited
to any Encumbered Intervals, at the Applicable Resort, including but not limited
to timeshare registration statutes, rules, and regulations.
(r) Management and Property Contract. The applicable Borrower has
received a copy of the management contract for the Applicable Resort (the
"Management Contract") and determined to its satisfaction that the Applicable
Resort is being managed by a professional management company acceptable to such
Borrower.
(s) Miscellaneous. Such other matters as Lender shall reasonably
require.
True copies or, to the extent required hereby, originals of all of the
above-referenced documents, instruments, forms, opinions, and other materials
required by Lender to be reviewed by it prior to the Closing Date shall be
delivered to Lender's counsel at least three (3) Business Days before the
Closing Date.
<PAGE>
SECTION 5. GENERAL REPRESENTATIONS AND WARRANTIES
Borrower, jointly and severally, hereby represents and warrants to Lender
as follows:
5.1 Organization, Standing, Qualification.
(a) Equivest Finance, Inc. (i) is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Florida
and as a foreign corporation under the laws of each jurisdiction in which the
character or location of the properties owned by it or the business transacted
by it requires licensing and qualification; and (b) has all requisite power,
corporate or otherwise, to conduct its business and to execute, deliver, and
perform its obligations under the Loan Documents.
(b) Resort Funding, Inc. (i) a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and as a
foreign corporation under the laws of each jurisdiction in which the character
or location of the properties owned by it or the business transacted by it
requires licensing and qualification; and (ii) has all requisite power,
corporate or otherwise, to conduct its business and to execute, deliver, and
perform its obligations under the Loan Documents.
(c) Eastern Resorts Corporation, Formerly Known as ERC Acquisition
Corp.. (i) is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and as a foreign corporation
under the laws of each jurisdiction in which the character or location of the
properties owned by it or the business transacted by it requires licensing and
qualification; and (ii) has all requisite power, corporate or otherwise, to
conduct its business and to execute, deliver, and perform its obligations under
the Loan Documents.
(d) Eastern Resorts Company, LLC. (i) is a Rhode Island limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Rhode Island and as a foreign limited liability company
under the laws of each jurisdiction in which the character or location of the
properties owned by it or the business transacted by it requires licensing or
qualification; and (ii) has all requisite power to conduct its business and to
execute, deliver and perform its obligations under the Loan Documents.
5.2 Authorization, Enforceability, Etc.
(a) The execution, delivery and performance by each Borrower of
the Loan Documents has been duly authorized by all necessary corporate actions
by such Borrower and does not and will not (i) violate any provision of each
Borrower's articles of incorporation, bylaws, or any agreement, law, rule,
regulation, order, writ, judgment, injunction, decree, determination, or award
presently in effect to which Borrower is a party or is subject; (ii) result in,
or require the creation or imposition of, any Lien upon or with respect to any
asset of each Borrower other than Liens in favor of Lender; or (iii) result in a
breach of, or constitute a default by each Borrower under, any indenture, loan,
or credit agreement or any other agreement, document, instrument, or certificate
to which each
<PAGE>
Borrower is a party or by which it or any of its assets are bound or affected,
including but not limited to any loan from or agreement of any type with a third
party lender.
(b) No approval, authorization, order, license, permit, franchise,
or consent of, or registration, declaration, qualification, or filing with, any
governmental authority or other Person is required in connection with the
execution, delivery, and performance by each Borrower of any of the Loan
Documents except those that have been obtained, e.g., participation lenders'
interests as more particularly described on Exhibit "D" attached hereto.
(c) The Loan Documents constitute legal, valid, and binding
obligations of each Borrower, enforceable against each Borrower in accordance
with their respective terms. To the best of each Borrower's knowledge after good
faith diligent inquiry, the Applicable Underlying Loan Documents constitute
legal, valid, and binding obligations of the relevant Applicable Underlying
Borrowers and Applicable Underlying Guarantors, enforceable against each of them
in accordance with the respective terms of such Applicable Underlying Loan
Documents.
(d) Each Borrower has good and marketable title to all of the
Collateral pledged by it, free and clear of any Lien, security interest, charge,
or encumbrance except for the Liens or security interests created by this
Agreement or any Loan Document or otherwise created in favor of Lender or those
Permitted Liens and Encumbrances as set forth on Exhibit "C" hereto. No
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except such as may
have been filed in favor of Lender or cover any Permitted Liens and
Encumbrances.
(e) The execution and delivery of the Loan Documents, the delivery
and endorsement to Lender of the Pledged Notes Receivable, the filing and
recordation of UCC-1 financing statements in each Applicable Jurisdiction, and
the recordation of the Pledges and Assignments of Notes Receivable and
Applicable Mortgages and other Loan Documents create in favor of Lender valid
and perfected continuing first priority Liens and security interests in and to
all of the Collateral (with the sole exception of the Debbie Reynolds Resort
Loans and the Irish Resorts) subject to the participation lenders' interests set
forth on Exhibit "D" attached hereto. The Collateral secures the full payment
and performance of the Obligations.
(f) To the best of Borrower's knowledge after good faith diligent
inquiry, none of the Pledged Notes Receivable is forged or has affixed thereto
any unauthorized signatures or has been entered into by any Person without the
required legal capacity,
(g) There have been no material modifications or amendments
whatsoever to the Pledged Notes Receivable or the Applicable Mortgages, other
than those expressly approved by Lender in writing, the originals of which have
been delivered to Custodian.
<PAGE>
(h) To the best of Borrower's knowledge after good faith diligent
inquiry, the makers of the Pledged Notes Receivable have no defenses, offsets,
claims, or counterclaims, relating to the Pledged Notes Receivable or any of the
other Applicable Underlying Loan Documents (with the sole exception of the
Debbie Reynolds Resort Loans).
(i) The Applicable Mortgages constitute and will continue to
constitute valid and enforceable first and exclusive Liens and security
interests on the Mortgaged Real Property and the Encumbered Intervals (with the
sole exception of the Debbie Reynolds Resort Loans).
(j) The Pledged Notes Receivable and the Applicable Mortgages are
and shall remain in full force and effect as valid and binding obligations of
the respective Applicable Underlying Borrowers in favor of Borrower, as assigned
to Lender hereunder.
(k) The grant of the Liens and security interests described herein
by Borrower in favor of Lender has not adversely affected and will not adversely
affect the validity or enforceability of the obligations of the respective
Applicable Underlying Borrowers under any of the Applicable Underlying Loan
Documents.
(l) Lender is not and shall not be required to take, and Borrower
has taken, any and all required steps to protect Lender's Liens and security
interests in the Collateral (other than maintaining or causing Custodian to
maintain possession, custody, and control of the portion of the Collateral
constituting instruments and timely filing continuation statements for UCC
financing statements); and Lender is not and shall not be required to collect or
realize upon the Collateral or any distribution of interest or principal, nor
shall loss of, or damage to, any Collateral release Borrower from any of the
Obligations (with the sole exception of the Irish Resorts.
5.3 Intentionally Omitted.
5.4 Financial Statements and Business Condition. The Financial Statements
fairly present the respective financial conditions and results of operations of
each Borrower as of the date or dates thereof and for the periods covered
thereby. There are no material liabilities, direct or indirect, fixed or
contingent, of each Borrower as of the dates of such Financial Statements that
are not reflected therein or in the notes thereto that have not otherwise been
disclosed to Lender in writing. Except for any such changes heretofore expressly
disclosed in writing to Lender, there have been no material adverse changes in
the respective financial conditions of each Borrower from the financial
conditions shown in their respective Financial Statements, nor has any Borrower
incurred any material liabilities, direct or indirect, fixed or contingent, that
are not shown in its Financial Statements. Each Borrower is able to pay all its
debts as they become due, and each Borrower, as the case may be, will maintain
such solvent financial condition, giving effect to the Obligations, as long as
each Borrower is obligated to Lender under this Agreement or any of the other
Loan Documents. No Borrower's Obligations under this Agreement and
<PAGE>
the other Loan Documents will render any Borrower unable to pay their respective
debts as they become due.
5.5 Taxes. Borrower represents and warrants that to the best of
Borrower's knowledge after good faith diligent inquiry, each Applicable
Underlying Borrower: (a) has paid in full all ad valorem taxes and other taxes
and assessments levied against the Applicable Underlying Loan Collateral, and
Borrower knows of no basis for any additional taxes or assessments against any
Applicable Resort or Applicable Underlying Loan Collateral; and (b) has filed
all tax returns required to have been filed by it and has paid or will pay,
prior to delinquency, all taxes shown to be due and payable on such returns,
including interest and penalties, and all other taxes that are payable by it. To
the best of Borrower's knowledge after good faith diligent inquiry, no tax audit
is pending or threatened with respect to any Borrower, any Applicable Underlying
Borrower, or any Applicable Underlying Guarantor.
5.6 Title to Properties; Prior Liens. To the best of Borrower's knowledge
after good faith diligent inquiry, each Applicable Underlying Borrower has good
and marketable title to all of the Applicable Underlying Loan Collateral pledged
by it, including but not limited to all Mortgaged Real Property and Encumbered
Intervals pledged by it, together with all rights, properties, and benefits
appurtenant or related thereto. Other than the Liens granted in favor of
Borrower and assigned to Lender hereunder, there are no Liens or encumbrances
against all or any portion of the Collateral or the Applicable Underlying Loan
Collateral, except for the Permitted Liens and Encumbrances.
5.7 Subsidiaries, Affiliates, and Capital Structure. Equivest is involved
in the business operations of and derives financial benefit from Resort Funding,
Eastern and Eastern, LLC. Eastern, Eastern, LLC and Resort Funding derive
benefit from Equivest and all parties will derive benefits from the Loan. For so
long as Borrower is obligated to Lender under any of the Loan Documents, Eastern
owns and shall continue to own 100% of the authorized, issued and outstanding
membership interests of Eastern, LLC. Neither Borrower nor any Affiliate of
Borrower is a party to any proxies, voting trusts, shareholder agreements, or
similar arrangements, pursuant to which voting authority, rights, or discretion
with respect to Resort Funding or Eastern is vested in any Person other than
Equivest. Further, there are no proxies, voting trusts, shareholder agreements
or similar arrangements to which voting authority, rights, or discretion are
restricted, with respect to Equivest, with the exception of the shareholder
agreement with Perry Harris and the Warrants and Registration Rights Agreement
with Lender.
5.8 Litigation, Proceedings, Etc. There are no actions, suits,
proceedings, orders, or injunctions pending or, to the best of each Borrower's
knowledge after good faith
<PAGE>
diligent inquiry, threatened against or affecting any Borrower, their respective
Affiliates, or any Applicable Resort, Applicable Underlying Borrower, or
Applicable Underlying Guarantor, at law or in equity, or before or by any
governmental authority or other tribunal, with the exception of the Debbie
Reynolds Resort Loans which are subject to a bankruptcy action and auction which
has been disclosed to Lender that (a) could have a material adverse effect on
any Borrower, any Affiliate of Borrower, any Applicable Resort, any Applicable
Underlying Borrower, or any Applicable Underlying Guarantor; or (b) could have a
material adverse effect on all or any portion of the Collateral or any
Applicable Underlying Loan Collateral. Exhibit "G," attached hereto and
incorporated herein by this reference, describes all currently pending
litigation against any Borrower.
5.9 Environmental Matters. To the best of each Borrower's knowledge after
good faith diligent inquiry: (a) none of the Applicable Resorts contain any
Hazardous Materials, and no Hazardous Materials are used or stored at or
transported to or from any Applicable Resort, except for commercially reasonable
amounts thereof commonly found at residential and resort properties in the
Applicable Jurisdiction; (b) no Applicable Underlying Borrower has received
notice from any governmental agency or other Person with regard to Hazardous
Materials on, under, or affecting all or any portion of the Applicable
Underlying Loan Collateral; and (c) neither any Applicable Underlying Borrower,
any Applicable Resort, nor any Applicable Underlying Loan Collateral are in
violation of any Environmental Laws.
5.10 Full Disclosure. No information, exhibit, or written report or the
content of any schedule furnished by or on behalf of any Borrower to Lender in
connection with the Loan, the Applicable Resorts, the Applicable Underlying
Borrowers, the Applicable Underlying Guarantors, the Applicable Underlying
Collateral, or the Collateral, and no representation or statement made by any
Borrower in any Loan Document, contains any material misstatement of fact or
omits the statement of a material fact necessary to make the statement contained
herein or therein not misleading. To the extent that any such information,
exhibit, report, or statement furnished or made to Lender was obtained by
Borrower from an Applicable Underlying Borrower, the representation and warranty
made in this Section 5.10 is so made to the best of such Borrower's knowledge
after good faith diligent inquiry. No Borrower knows of any fact or condition
that could adversely affect the construction of the Financed Improvements or the
operation of all Applicable Resorts in accordance with all Applicable Laws, or
impede or preclude any Borrower's performance of its Obligations pursuant to the
Loan Documents.
5.11 Use of Proceeds/Margin Stock. None of the proceeds of the Loan will
be used to purchase or carry any "margin stock" (as defined under Regulation U
of the Board of Governors of the Federal Reserve System, as in effect from time
to time), and no portion of the proceeds of the Loan will be extended to others
for the purpose of purchasing or carrying margin stock. None of the transactions
contemplated in this Agreement (including, without limitation, the use of the
proceeds from the Loan) will violate or result in the violation of Section 7 of
the Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations G, T, U and
<PAGE>
X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 11.
The proceeds of the Loan will be disbursed only for the purposes set forth in
Section 2.1 hereof.
5.12 No Defaults. No Default or Event of Default exists, and there is no
breach or violation in any material respect of any term of any document,
contract, agreement, charter instrument, bylaws, or other instrument to which
any Borrower or any Affiliate thereof is a party or by which it may be bound.
5.13 Restrictions of Borrower. Neither Borrower, nor any Affiliate
thereof is a party to any contract or agreement, or subject to any Lien, charge,
or restriction, that materially and adversely affects its business. No Borrower
will be, on or after the Closing Date, a party to any contract or agreement that
restricts its right or ability to incur indebtedness (with the exception of the
participation lenders' interests in connection with certain Pledged Notes
Receivable as set forth in Exhibit "D" attached hereto and the Timeshare
Receivables Hypothecation Facility, Timeshare Receivable Purchase Facility,
Timeshare Construction Loan Facility and Long Wharf Loan, or prohibits any
Borrower's execution and delivery of, or compliance with the terms of, this
Agreement or the other Loan Documents. Borrower has not agreed or consented to
cause or permit in the future (upon the happening of any contingency or
otherwise) any of the Collateral, whether now owned or hereafter acquired, to be
subject to a Lien except for Permitted Liens and Encumbrances and Liens in favor
of Lender as provided hereunder.
5.14 Broker's Fees. Lender and each Borrower represent to each other that
neither of them has made any commitment or taken any action that could result in
a claim for any broker's, finder's, or other similar fees or commissions with
respect to any of the transactions contemplated by this Agreement. Borrower
agrees to indemnify Lender and save and hold Lender harmless from and against
all claims of any Person for any broker's or finder's fee, commission, or
similar amount and this indemnity shall include reasonable attorneys' fees and
legal expenses.
5.15 Tax Identification/Social Security Numbers. Each Borrower's
respective federal taxpayer identification numbers are as follows:
Resort Funding, Inc.: 16-1399129
Equivest, Inc.: 59-2346270
Eastern: __________
Eastern, LLC: __________
5.16 Legal Compliance. Each Borrower has, in all material respects,
complied fully with all Applicable Laws in connection with the Applicable
Underlying Loans. To the best of Borrower's knowledge after good faith diligent
inquiry, each Applicable Underlying
<PAGE>
Borrower has, in all material respects, similarly complied with all Applicable
Laws in connection with Applicable Resort and Applicable Underlying Loan
Collateral. In particular, Borrower is not aware of any violation by an
Applicable Underlying Borrower of: (i) the Interstate Land Sales Full Disclosure
Act; (ii) any applicable state condominium and timeshare statutes, rules, and
regulations, including but not limited to those governing the administration and
operation of owners' associations and those requiring registration of any of the
Encumbered Intervals; (iii) Regulation Z of the Federal Reserve Board; (iv) the
Equal Credit Opportunity Act; (v) Regulation B of the Federal Reserve Board;
(vi) Section 5 of the Federal Trade Commission Act; (vii) all applicable state
and federal securities laws; (viii) all applicable usury laws; (ix) all
applicable trade practices, home and telephone solicitation, sweepstakes,
lottery, and other consumer credit and protection laws; (x) all applicable real
estate sales licensing, disclosure, reporting, and escrow laws; (xi) the
Americans with Disabilities Act; (xii) the Real Estate Settlement Procedures
Act; and (xiii) all amendments to and rules and regulations promulgated under
the foregoing. Furthermore, to the best of Borrower's knowledge after good faith
diligent inquiry, all Applicable Resorts and the improvements (including the
Financed Improvements) thereat have been and will continue to be constructed and
operated in compliance with all applicable zoning requirements, building codes,
subdivision ordinances, licensing requirements, all covenants, conditions, and
restrictions of record, and all other Applicable Laws. Borrower is not aware of
any reasons (other than the completion of all requisite applications therefor in
the ordinary course of business) why all Applicable Underlying Borrowers cannot
obtain all necessary permits, licenses, certificates, franchises, consents,
exemptions, orders, and approvals to develop and operate the Applicable Resorts
and construct the Financed Improvements thereat.
5.17 Continuation and Investigation. All representations, warranties,
covenants, and agreements made herein or in any certificate or other document
delivered to Lender by or on behalf of Borrower, pursuant to or in connection
with this Agreement, shall be deemed to have been relied upon by Lender,
notwithstanding any investigation heretofore or hereafter conducted by or on
behalf of Lender, and shall survive the making of any or all Advances and
payments contemplated hereby.
5.18 Intentionally Omitted.
5.19 Management's Background. During the past ten (10) years no person
involved in the management of Borrower has been arrested or convicted of any
crime involving moral turpitude, been bankrupt, or been an officer, director,
partner, member or other responsible official of a bankrupt company, partnership
or other entity, except as otherwise previously disclosed in detail to Lender in
writing prior to the Closing Date.
------------ ------------- -------------
Initial Initial Initial
5.20 Subsidiaries. Borrower has no subsidiaries or affiliates except for
those that are disclosed in writing to Lender.
<PAGE>
5.21 Eastern Merger. Eastern Resorts Corporation, a Rhode Island
corporation, has merged with ERC Acquisition Corp. with ERC Acquisition Corp.
being the surviving corporation and ERC Acquisition Corp. has changed its name
to Eastern Resorts Corporation.
5.22 Solvency. Borrower is solvent, able to pay its debts as they mature,
has capital sufficient to carry on the businesses in which it is engaged and the
present fair saleable value of its assets is greater than the amount of its
liabilities.
5.23 Year 2000. Borrower has made an assessment of the microchip and
computer-based systems and the software used in its business and based upon such
assessment believes that it will be "Year 2000 Compliant" by December 1, 1999.
For purposes of this paragraph, "Year 2000 Compliant" means that all software,
embedded microchips and other processing capabilities utilized by, and material
to the business operations or financial condition of, Borrower are able to
interpret, store, transmit receive and manipulate data on and involving all
calendar dates correctly and without causing any abnormal ending scenarios in
relation to dates in and after the Year 2000. From time to time, at the request
of Lender, Borrower shall provide to Lenders such updated information as is
requested regarding the status of its efforts to become Year 2000 Compliant.
SECTION 6. COVENANTS
6.1 Affirmative Covenants. For so long as any of Borrower's Obligations
remain unsatisfied, Borrower hereby covenants and agrees with Lender as follows:
(a) Payment and Performance of Obligations. Borrower shall repay
all of the Loan and all related amounts when and as the same become due and
payable, and Borrower shall strictly observe and perform all of the Obligations,
including, without limitation, all covenants, agreements, terms, conditions, and
limitations contained in the Loan Documents, and will do all things necessary
that are not prohibited by law to prevent the occurrence of any Default or Event
of Default hereunder; and Borrower will maintain an office or agency in the
State of New York where notices, presentations, and demands in respect of the
Loan Documents may be made upon Borrower.
(b) Maintenance of Existence, Qualification and Assets. Each
Borrower shall at all times (i) maintain its legal existence; (ii) maintain its
qualification, where required, to transact business and good standing in the
State of New York and in any other jurisdiction in which it conducts business;
and (iii) comply or cause its compliance with all Applicable Laws.
(c) Maintenance of Insurance. Borrower shall ensure that each
Applicable Underlying Borrower complies with all insurance requirements as set
forth in the Applicable Underlying Loan Documents until all of Borrower's
Obligations have been fully satisfied and that all required policies of
insurance with premiums therefor being paid when due, are maintained and,
promptly upon request by Lender shall deliver to Lender originals of insurance
policies issued by insurance companies (together with paid premium invoices
<PAGE>
in respect thereof), in amounts, in form, and in substance, and with expiration
dates, as required in the Applicable Underlying Loan Documents and containing
waivers of subrogation rights by the insuring company, non-contributory standard
mortgagee benefit clauses or their equivalents, and mortgagee loss payable
endorsements in favor of and satisfactory to Lender.
Borrower shall not waive any material insurance provision in any
Applicable Underlying Loan Document without Lender's prior written consent.
(d) Maintenance of Collateral. The applicable Borrower shall
execute and deliver (or cause to be executed and delivered) to Lender all
security agreements, financing statements, assignments, and such other
agreements, documents, instruments, and certificates, and all supplements and
amendments thereto, and take all such other actions, as Lender deems necessary
or appropriate in order to maintain as valid, enforceable, and perfected first
priority Liens and security interests (with the sole exception of the Debbie
Reynolds Resort Loans and the Irish Resorts), all Liens and security interests
in the Collateral and Applicable Underlying Loan Collateral granted to Lender by
such Borrower to secure the Obligations. Borrower shall not grant extensions of
time for the payment of (with the sole exception of the Debbie Reynolds Resort
Loans), or compromise for less than the full face value or release in whole or
in part, any Applicable Underlying Borrower, Applicable Underlying Guarantor, or
other Person liable for the payment of, or allow any credit whatsoever except
for the amount of cash to be paid upon, any Collateral or any instrument,
chattel paper, or document representing the Collateral.
(e) Payment of Taxes and Claims. Borrower agrees to pay or cause
to be paid, when due, all taxes and assessments of any kind imposed on or with
respect to the Loan or any of the Loan Documents, or the Collateral, including
but not limited to the Mortgaged Real Property and the Encumbered Intervals.
Borrower shall make good faith inquiry on a regular basis to determine whether
all such taxes and assessments have been paid. Borrower shall immediately notify
Lender in writing of any failure to timely pay all taxes and assessments due. In
the event that Lender determines (through notice from Borrower or otherwise)
that any such taxes or assessments have not been paid when due, Borrower shall
have thirty (30) days from receipt of a written request for payment from Lender
to cause the required taxes to be paid. If such required taxes (and any
applicable late charges, etc.) are not paid within such thirty (30) day period,
Lender may, in its sole discretion, without any obligation to do so, choose to
pay such taxes on behalf of Borrower or the Applicable Underlying Borrower, in
which case Borrower shall pay Lender interest at the Default Rate on any amounts
so advanced. In the event Lender elects not to pay the required taxes and the
required taxes are not paid as set forth above, such failure shall constitute an
Event of Default hereunder. Borrower shall pay, where applicable, or shall use
its best efforts to cause the Applicable Underlying Borrower or Applicable
Underlying Guarantor to pay all other charges and assessments levied against
such Applicable Underlying Borrower, the Applicable Underlying Loan Collateral,
or the Applicable Resort before any claim (including, without limitation, claims
for labor, services, materials, or supplies) arises for amounts that have become
due and payable.
<PAGE>
(f) Inspections. To the extent permitted by documents applicable
to any Applicable Underlying Loan Collateral, Borrower shall, at any time and
from time to time, upon reasonable notice and at the expense of such Borrower,
including but not limited to the travel expenses of Lender's agents, ensure that
the Applicable Underlying Loan Documents permit, or use its good faith
commercially reasonable efforts to arrange for, Lender or its agents or
representatives to inspect any Applicable Resort, any Applicable Underlying Loan
Collateral, or any of each Borrower's assets, including but not limited to all
documents, bank statements, and other records within each Borrower's possession,
custody, or control, and to examine and make copies and abstracts thereof; and
to discuss its affairs, finances and accounts with any of its officers,
employees, Affiliates, contractors or independent certified public accountants
(and by this provision, each Borrower authorizes said accountants to discuss
with Lender, its agents or representatives, the affairs, finances, and accounts
of each Borrower). Notwithstanding the foregoing provisions of this Section
6.1(f) to the contrary, Lender will make no more than two (2) such inspections
per year in connection with any particular Applicable Underlying Loan unless an
Event of Default hereunder has occurred. Lender agrees to use reasonable efforts
not to interfere unreasonably with the Applicable Underlying Borrower's business
operations in connection with any such inspections. Without limiting the
foregoing, Lender shall have the right to make such credit investigations as
Lender may deem appropriate, in its sole discretion, in connection with its
review of any Applicable Underlying Loan Documents. The applicable Borrower
shall make available to Lender all such credit and other information in such
Borrower's possession or under its control or to which it may have access with
respect to Applicable Underlying Borrowers and Applicable Underlying Guarantors
as Lender may request.
(g) Reporting Requirements. For so long as any of the Obligations
remain unsatisfied, Borrower shall furnish (or cause to be furnished, as the
case may be) to Lender in each case certified in writing by Borrower as true and
correct, the following:
(i) Quarterly Financial Reports. As soon as available and
in any event within forty-five (45) days following the end of each calendar
quarter, unaudited statements of income and expense of Borrower for the
quarterly period in question and balance sheets of each Borrower as of the last
day of such calendar quarter, all in such detail and scope as may be reasonably
required by Lender, prepared in accordance with GAAP and on a basis consistent
with prior accounting periods, together with a one-page management summary.
Equivest shall provide consolidated financial statements. Each quarterly
financial statement of each Borrower shall be certified as true and correct by
such Borrowers' chief financial officer, as appropriate;
(ii) Annual Audited Financial Reports. As soon as available
and in any event within one hundred twenty (120) days after the end of each of
calendar year or other fiscal year as may be applicable with respect to any
Borrower (a "Fiscal Year"), statements of income and expense of such Borrower
for the annual period ended as of the end of such Fiscal Year, and balance
sheets of such Borrower as of the end of such Fiscal
<PAGE>
Year, all in such detail and scope as may be reasonably required by Lender and
prepared and audited by Firley, Moran, Freer and Eassa, P.C., or any other
national independent certified public accounting firm acceptable to Lender in
accordance with GAAP and on a basis consistent with prior accounting periods,
together with a one-page management summary. Each annual financial statement of
each Borrower shall be certified by such Borrower to be true, correct, and
complete, and shall otherwise be in form acceptable to Lender;
(iii) Officer's Certificate. Each set of annual Financial
Statements or reports delivered to the Lender pursuant to Sections 6.1(g)(i) and
(ii) hereof shall be accompanied by a certificate of the President or the Chief
Financial Officer of the applicable Borrower, as appropriate, setting forth that
the signers have reviewed the relevant terms of this Agreement (and all other
agreements and exhibits between the relevant parties), have made, or caused to
be made, under their supervision, a review of the transactions and conditions of
such Borrower from the beginning of the period covered by the Financial
Statements or reports being delivered therewith to the date of the certificate,
and that such review has not disclosed the existence during such period of any
condition or event that constitutes a Default or Event of Default or, if any
such condition or event existed or exists or will exist, specifying the nature
and period of existence thereof and what action such Borrower has taken or
proposes to take with respect thereto;
(iv) Collateral Reports. As part of its monthly report
package previously submitted to Lender in connection with any Applicable
Underlying Loan that is secured in part by an Inventory Mortgage, within ten
(10) days after the end of each month and within ninety (90) days after the end
of each Fiscal Year, Borrower shall deliver to Lender, monthly and annually, as
appropriate, a listing of each Applicable Underlying Loan, together with the
payment and income status of each Applicable Underlying Loan and such other
information concerning each Applicable Underlying Loan as Lender may specify;
(v) Audit Reports. Promptly upon receipt thereof, one (1)
copy of each other report submitted to any Borrower by independent public
accountants or other Persons in connection with any annual, interim, or special
audit made by them of the books of such Borrower;
(vi) Notice of Default or Event of Default. Promptly upon
becoming aware of the existence of any condition or event that constitutes a
Default or an Event of Default hereunder or any of the other Loan Documents, or
a default or event of default pursuant to any of the Applicable Underlying Loan
Documents, a written notice specifying the nature and period of existence
thereof and what action Borrower is taking or proposes to take with respect
thereto;
(vii) Notice of Claimed Default. Promptly upon becoming
aware that the holder of any material obligation or of any evidence of material
indebtedness of Borrower, any Applicable Underlying Borrower or Applicable
Underlying Guarantor has given notice or taken any other action with respect to
a claimed default or event of default
<PAGE>
with respect thereto, a written notice specifying the notice given or action
taken by such holder and the nature of the claimed default or event of default
and what action Borrower is taking or proposes to take with respect thereto;
(viii) Material Adverse Developments. Promptly upon
becoming aware of any information, other than information relating to any
litigation, investigation, proceedings or claims pending or threatened against
any Borrower, that could materially and adversely affect such Borrower, any
Applicable Underlying Borrower, any Applicable Underlying Guarantor, any
Applicable Resort, any Applicable Underlying Loan Collateral, or all or any
portion of the Collateral, including but not limited to the ability of such
Borrower to perform its Obligations hereunder, such Borrower shall provide
Lender with telephonic notice thereof, immediately followed by telecopied and
mailed written confirmation, specifying the nature of such development or
information and the anticipated effect thereof;
(ix) Litigation or Investigations. Within ten (10) days
after the end of each month a statement describing any litigation,
investigation, proceedings or claims pending or to Borrower's knowledge
threatened against Borrower that could have a material adverse effect on
Borrower's ability to perform its obligations under the Loan documentation (to
the extent not previously disclosed to Lender unless there has been a material
change in the status of such litigation, investigations, proceedings or claims
previously disclosed to Lender in which case the previous disclosure shall be
updated accordingly);
(x) Quarterly Meeting or Teleconference. Within ten (10)
days after the end of each quarter (or on such other date specified by Lender) a
meeting or teleconference with senior management of Borrower reviewing
Borrower's operations and activities with Lender; and
(xi) Other Information. Borrower shall promptly deliver to
Lender any other available information related to the Loan, the Collateral, the
Applicable Underlying Loan Collateral, Borrower, the Applicable Resorts, the
Applicable Underlying Borrowers, or the Applicable Underlying Guarantors as
Lender may in good faith request.
(h) Records. Borrower shall keep detailed accurate books and
records of account in accordance with GAAP reflecting all financial transactions
of Borrower with respect to the Applicable Underlying Loans.
(i) Corporation Structure. Absent the prior written consent of
Lender, which may be granted or withheld in Lender's sole and absolute
discretion, Equivest shall remain the owner and holder of one hundred percent
(100%) of the authorized, issued, and outstanding shares of stock of Resort
Funding and Eastern and Eastern shall remain the owner and holder of one hundred
percent (100%) of trhe membership interests of Eastern-LLC. Borrower shall not
enter into any proxies, voting trusts, shareholder agreements, or similar
arrangements for the purpose of vesting voting rights, authority, or discretion
in any other Person, with the exception of the shareholder agreement with Perry
Harris and any warrants and registration rights agreements with Lender;
provided, however that Lender may enter into customary and
<PAGE>
reasonable incentive stock option agreements with present and future management
with Lender's prior written consent, which consent shall not be unreasonably
withheld.
(j) Notices. Borrower shall notify Lender within five (5) Business
Days of the occurrence of any event or if such Borrower becomes aware of such
event after such five (5) Business Days, immediately upon becoming so aware (i)
as a result of which any representation or warranty of Borrower contained in any
Loan Document would be incorrect or materially misleading if made at that time;
(ii) as a result of which Borrower is not in full compliance with all of its
covenants and agreements contained in this Agreement or any other Loan Document;
or (iii) which constitutes or, with the passage of time or notice or a
determination by Lender would constitute, a Default or an Event of Default.
(k) Other Documents. Borrower shall maintain to the satisfaction
of Lender, and make available to Lender, accurate and complete files relating to
the Pledged Notes Receivable and all of the other Collateral, and such files
shall contain true copies of each Pledged Note Receivable, as amended from time
to time, copies of all relevant credit memoranda relating to such Pledged Notes
Receivable, and all collection information and correspondence relating thereto.
(l) Further Assurances. Borrower shall execute and deliver, or
cause to be executed and delivered, such other and further agreements,
documents, instruments, certificates, and assurances as, in the judgment of
Lender exercised in good faith, may be necessary or appropriate in order more
effectively to evidence or secure, and to ensure the performance of, the
Obligations. In addition, Borrower shall deliver to Lender from time to time,
upon written request by Lender, such documents, instruments, and other materials
or items as Lender may reasonably require to evidence Borrower's compliance with
the covenants set forth in this Section 6.1.
(m) Expenses and Closing Fees. Whether or not the transactions
contemplated hereunder are consummated, Borrower shall pay all reasonable
expenses of Lender relating to negotiating, preparing, documenting, closing, and
enforcing this Agreement and the other Loan Documents, including but not limited
to:
(i) The cost of preparing, reproducing, and binding this
Agreement, the other Loan Documents, and all exhibits and schedules thereto;
(ii) The fees and disbursements of Lender's and Borrower's
counsel;
(iii) Lender's out-of-pocket expenses;
(iv) All fees and expenses (including fees and expenses of
Lender's counsel) relating to any amendments, waivers, consents, or subsequent
closings or other transactions pursuant to the provisions hereof;
<PAGE>
(v) All costs, outlays, legal fees, and expenses of every
kind and character had or incurred in: (A) the interpretation or enforcement of
any of the provisions of, or the creation, preservation, or exercise of rights
and remedies under, any of the Loan Documents, including the costs of appeal;
(B) the preparation for, negotiations regarding, consultations concerning, or
the defense or prosecution of legal proceedings involving any claim or claims
made or threatened against Lender arising out of this transaction or the
preservation or protection of the Collateral securing the Loan or Advances made
hereunder, expressly including, without limitation, the defense by Lender of any
legal proceedings instituted or threatened by any Applicable Underlying
Borrower, Applicable Underlying Guarantor, or other Person to seek to recover or
set aside any payment or set off theretofore received or applied by the Lender
with respect to the Obligations as provided in this Agreement, and any and all
appeals thereof; and (C) the advancement of any expenses provided for under any
of the Loan Documents;
(vi) All fees and expenses of Lockbox Agent, if any, and
Custodian;
(vii) All costs and expenses incurred by Lender under the
Note, and all late charges payable under the Note; and
(viii) To the extent the same are not paid by an Applicable
Underlying Borrower, all real and personal property taxes and assessments,
documentary stamp and intangible taxes, sales taxes, recording fees, title
insurance premiums and other title charges, document copying, transmittal and
binding costs, appraisal fees, lien and judgment search costs, fees of
architects, engineers, environmental consultants, surveyors and any special
consultants, construction inspection fees, brokers fees, escrow fees, wire
transfer fees, and all travel and out-of-pocket expenses of Lender to conduct
inspections or audits with the exception of the fees and expenses of the
Servicing Agent. Without limiting any of the foregoing, Borrower shall pay the
costs of Code and other searches, Code and other Loan Document recording and
filing fees, and applicable taxes and premiums on each mortgagee policy of title
insurance delivered to Lender pursuant to this Agreement, to the extent the same
are not paid by an Applicable Underlying Borrower.
(n) Indemnification of Lender. In addition to (and not in lieu of)
any other provisions hereof or of any other Loan Document providing for
indemnification in favor of Lender, Borrower hereby defends, indemnifies, and
holds harmless Lender, its subsidiaries, other Affiliates, officers, directors,
agents, employees, representatives, consultants, contractors, servants and
attorneys as well as the respective heirs, personal representatives, successors,
and assigns of any or all of them (hereinafter collectively referred to as the
"Indemnified Lender Parties"), from and against, and agrees promptly to pay on
demand or reimburse each of them with respect to, any and all liabilities,
claims, demands, losses, damages, costs, and expenses (including, without
limitation, reasonable attorneys' and paralegals' fees and costs), actions or
causes of action of any and every kind or nature whatsoever asserted against or
incurred by any of them by reason of or arising out of or in any way, directly
or indirectly, related or attributable to: (i) this Agreement, the other Loan
Documents, the Commitment, the Collateral, the Applicable
<PAGE>
Underlying Loan Documents, or the Applicable Underlying Loan Collateral; (ii)
the transactions contemplated under any of the Loan Documents or the Applicable
Underlying Loan Documents, including, without limitation, those in any way
relating to or arising out of the violation of any Applicable Laws; (iii) any
breach of any covenant or agreement or the incorrectness or inaccuracy of any
representation or warranty of Borrower contained in this Agreement or any of the
other Loan Documents (including, without limitation, any certification of
Borrower delivered to Lender; (iv) any and all taxes, including real estate,
personal property, sales, mortgage, excise, intangible, or transfer taxes but
excluding all franchise taxes, taxes on capital, gross receipts taxes and taxes
imposed on net income, and any and all fees or charges that may at any time
arise or become due prior to the payment, performance, and discharge in full of
the Obligations; (v) the breach of any representation or warranty as set forth
herein regarding any Environmental Laws; (vi) the failure of Borrower or an
Applicable Underlying Borrower to perform any obligation or covenant herein
required to be performed pursuant to any Environmental Laws; (vii) the use,
generation, storage, release, threatened release, discharge, disposal, or
presence on, under, or about any Applicable Resort of any Hazardous Materials
(except to the extent that liability of the Indemnified Lender Party with
respect to such matter would not exist but for the acts or omissions of such
Indemnified Lender Party as determined in a final, non-appealable adjudication
by a court of competent jurisdiction); (viii) the removal or remediation of any
Hazardous Materials from an Applicable Resort required to be performed pursuant
to any Environmental Laws or as a result of recommendations of any environmental
consultant or as required by Lender; (ix) claims asserted by any Person
(including, without limitation, any governmental or quasi-governmental agency,
commission, department, instrumentality or body, court, arbitrator, or
administrative board in connection with or any in any way arising out of the
presence, use, storage, disposal, generation, transportation, release, or
treatment of any Hazardous Materials on, in, under, or affecting any Applicable
Resort; (x) the violation or claimed violation of any Environmen tal Laws in
regard to an Applicable Resort; (xi) the preparation of an environmental audit
or report on an Applicable Resort not to exceed one (1) per calendar year and
premised upon the Lender's reasonable belief of the existence of a violation of
Environmental Laws, whether conducted by Lender, Borrower, an Applicable
Underlying Borrower, or another Person; (xii) the exercise by Borrower of any
rights or remedies under the Applicable Underlying Loan Documents or any
Applicable Laws; or (xiii) the exercise by Lender of any rights or remedies
under this Agreement or any of the other Loan Documents. Such indemnification
shall not give Borrower any right to participate in the selection of counsel for
Lender or the conduct or settlement of any dispute or proceeding for which
indemnifica tion may be claimed. The provisions of this Section shall survive
the full payment, performance, and discharge of the Obligations and the
termination of this Agreement, and shall continue thereafter in full force and
effect. Notwithstanding to foregoing, Borrower shall not indemnify and hold
Lender harmless, as set forth herein in the event any liabilities, claims,
demands, losses, damages, costs or expenses incurred by Borrower are as a direct
result of Lender's gross negligence or willful misconduct with respect to the
Loan or the Loan Documents.
<PAGE>
(o) Loan Servicing. The Servicing Agreement shall be in form and
content satisfactory to Lender, in its sole discretion. Borrower may not
terminate the Servicing Agreement without's Lender's prior written approval. The
Servicing Agreement shall be cancelable by Lender immediately following the
occurrence of an Event of Default. If the Servicing Agent is Borrower or an
Affiliate of Borrower, no servicing fees shall be paid during or with respect to
any period of time in which a Default or Event of Default hereunder exists.
(p) Use of Borrower's Name. Borrower shall at all times during the
term of the Loan permit Lender to use the name of Borrower or any of its
Affiliates in any press release, advertisement, or other promotional material
disseminated regarding the Loan.
(q) Minimum Net Worth Requirement. Borrower agrees to maintain the
Minimum Net Worth Requirement at all times during the term of this Agreement.
(r) Minimum Quarterly Net Income Requirement. Borrower agrees to
maintain the Minimum Quarterly Net Income Requirement at all times during the
term of this Agreement.
(s) Capital Structure. Borrower shall at all times during the term
of the Loan maintain the capital structure described in and comply in all
respects with Section 5.7 hereof.
6.2 Right of Lender to Inspect Property. Lender, at any reasonable time
and from time to time, shall be entitled to enter upon each Applicable Resort
and to inspect the Financed Improvements and all materials to be used in the
construction thereof, and Borrower shall cooperate and use its good faith
commercially reasonable efforts to cause each Applicable Underlying Borrower and
each General Contractor to cooperate with Lender during such inspections
(including making available to Lender working copies of the Plans, together with
all related supplementary materials); provided, however, that this provision
shall not be deemed to impose upon Lender any obligation to undertake such
inspections, and further provided that if no Event of Default exists hereunder,
such inspections shall be limited to two (2) times per year in connection with
each Applicable Resort.
6.3 Negative Covenants. For so long as any portion of the Obligations
remains unsatisfied, Borrower hereby covenants and agrees with Lender as
follows:
(a) Limitation on Other Liens/Further Encumbrances of Collateral.
Without the prior written consent of Lender, which may be granted, withheld, or
conditioned, in Lender's sole and absolute discretion, Borrower shall not
create, incur, assume or permit to exist any Liens with respect to all or any
portion of the Collateral (whether now existing or created hereafter) other than
Permitted Liens and Encumbrances and those in favor of Lender.
<PAGE>
(b) Restrictions on Transfers. Borrower shall not, without
obtaining the prior written consent of Lender (which consent may be given,
withheld, or conditioned by Lender, in Lender's sole and absolute discretion),
whether voluntarily or involuntarily, by operation of law or otherwise: (i)
transfer, sell, pledge, convey, hypothecate, factor, or assign all or any
portion of the Collateral (with the exception of existing participation lender's
interests as set forth on Exhibit "D" attached hereto); (ii) lease or license
any portion of the Collateral, or change the legal or actual possession or use
thereof; or (iii) permit the dilution, transfer, pledge, hypothecation, or
encumbrance of any of the stock of Borrower except in the case of Equivest, for
reasonable and customary trading of Equivest stock in the public market or in
connection with the satisfaction of the Obligations of the Transaction.
(c) Use of Lender's Name. Without the prior written consent of
Lender, Borrower will not, and will not permit any Affiliate to, use the name of
Lender, of Credit Suisse First Boston Corporation, or of any other affiliate of
Lender in any press release, advertising, or other promotional materials of any
kind.
(d) Intentionally Omitted.
(e) Subordinated Obligations. Borrower shall not, directly or
indirectly, make or permit any payment to be made in respect of any
indebtedness, claims, rights, liabilities, or obligations, direct or contingent,
to any of its shareholders or other Affiliates or their respective successors
and assigns; provided, however, that for so long as no Default or Event of
Default exists with respect to the Loan and payment of any such subordinated
debt would not render any Borrower insolvent, such subordinated debt may be
repaid under such regularly scheduled payment terms (as are approved in writing
by Lender).
(f) Name Change. Borrower shall not change its name, its chief
executive office, or the locations at which it does business without providing
Lender at least thirty (30) days' prior written notice thereof and executing, at
Borrower's sole expense, such UCC-3 amendments and all other documents and
instruments as Lender, in its sole discretion, deems reasonably necessary or
appropriate in order to continue the perfection of its Lien in and to all of the
Collateral; provided, however, that under no circumstances shall the name of
Borrower ever include the word "Bennett" in it.
(g) Collateral. Borrower shall not take any action (or permit or
consent to the taking of any action) that might materially impair the value of
all or any portion of the Collateral or any of the rights of Lender with respect
to the Collateral, nor shall Borrower cause or permit any material amendment to
or modification of the form or terms of any of the Pledged Notes Receivable,
Applicable Mortgages, other Applicable Underlying Loan Documents, or any
Applicable Timeshare Documents, including but not limited to the Applicable
Declarations.
<PAGE>
(h) Dividends, Distributions and Similar Events. Except as
disclosed in the documents described in Schedule A attached hereto and
incorporated herein by this reference, Borrower shall not declare or pay any
dividends, fees, expenses or other sums or make any distribution in cash or
assets to Borrower's shareholders, or any Affiliate of any of the foregoing, or
make any loans, salary advances or other payments (with the exception of
reasonable and customary director's fees payable to directors of any Borrower
and reasonable and customary salaries in accordance with existing employment
agreements with officers or employees of Borrower) to (i) any shareholder,
officer or director of Borrower (as appropriate), or (ii) any corporation,
partnership or other enterprise directly or indirectly owned in whole or in part
by any officer, director or shareholder of Borrower, or any Affiliate of any of
the foregoing, except in the event such payments are paid directly to Lender (or
to a Lockbox Agent for Lender) to be applied to the Loan; provided, however,
Resort Funding may collect servicing fees from Eastern with respect to the
servicing of Eastern receivables by Resort Funding and Resort Funding and
Eastern are permitted to make payments to each other respectively in connection
with certain permitted inter-company transactions. Any inter-company transaction
in excess of $50,000 must be approved by Lender prior to the consummation of any
such transaction.
(i) No Amendment, Modifications. Borrower shall not materially
amend, modify or assign to any other party any of the agreements or documents
executed between Equivest and Eastern. These documents shall include, without
limitation, all employment and compensation agreements, loan documents and any
other agreements in existence prior to or concurrent with the Closing Date.
(j) Transfer of Assets. Borrower shall not sell, exchange, assign,
loan, deliver, lease, mortgage or otherwise dispose of any of its assets, except
in the ordinary course of the Borrower's business for full and fair
consideration, which in no event shall include a transfer for full or partial
satisfaction of a preexisting debt.
<PAGE>
(k) Indebtedness. Borrower shall not create, incur, assume or in
any manner become liable in respect to any indebtedness secured by the
Collateral except for:
(i) normal trade debts incurred in the ordinary course of
the Borrower's business;
(ii) the indebtedness evidenced by the Loan or in favor of
Lender;
(iii) indebtedness outstanding on the date hereof and
disclosed to the Lender in the financial statements referred to in Section ___;
and
(iv) indebtedness used to repay the Loan or to pay any
other Obligations to Lender.
(l) Liens. Borrower shall not create, incur, assume or suffer to
exist any lien, security interest or encumbrance of any kind upon any of the
Borrower's property or assets, nor enter into any sale-leaseback arrangements,
except for:
(i) liens securing the payment of taxes or assessments,
either not yet due or the validity of which are being contested in good
faith by appropriate proceedings so long as the Borrower is prosecuting such
contest diligently, and as to which the Borrower has set aside on its books
adequate reserves with respect thereto to the extent required by generally
accepted accounting principles;
(ii) deposits under workers' compensation, unemployment
insurance and social security laws, or to secure the performance of bids,
tenders, contracts (other than for the repayment of borrowed money) or leases,
or to secure statutory obligations or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds in the ordinary course of
business;
(iii) liens imposed by law, such as carriers',
warehousemen's or mechanics' liens, incurred by it in good faith in the ordinary
course of business, and liens arising out of a judgment or award against it with
respect to which it will currently be prosecuting an appeal, a stay of execution
pending such appeal having been secured;
(iv) liens in favor of the Lender (including but not
limited to those securing the Obligations);
(v) reservations, exceptions, encroachments and other
similar title exceptions or encumbrances affecting real properties, provided
such do not materially detract from the use or value thereof as used by the
owner thereof;
(vi) attachment, judgment and similar liens provided that
execution is effectively stayed pending a good faith contest so long as the
Borrower is prosecuting
<PAGE>
such contest diligently, and as to which the Borrower has set aside on its books
adequate reserves to the extent required by generally accepted accounting
principles;
(vii) liens created by purchase money security agreements
or conditional sale agreements entered into in the ordinary course of business
of the Borrower that do not in any single transaction secure more than Twenty
Five Thousand and 00/100 Dollars ($25,000), provided that the aggregate of all
such liens outstanding at any one time shall not exceed Two Hundred Thousand
and 00/100 Dollars ($200,000);
(viii) liens created by purchase money security agreements
or conditional sale agreements existing on the date hereof and disclosed to the
Lender in the Financial Statements delivered to Lender prior to the Closing
Date;
(ix) liens in existence on the date hereof which are listed
and described on Exhibit "L" attached hereto and incorporated herein by this
reference; and
(x) the replacement, extension or renewal of any liens
existing on the date hereof.
(m) Merger; Acquisition; Change of Status. Borrower shall not
merge or consolidate with any company or enterprise, or acquire or purchase any
other company or enterprise, or enter into any partnership, joint venture or
otherwise substantially change its legal structure, or create any subsidiary,
change the general character of its business as it is presently conducted, or
dissolve or cease to be a going concern or sell substantially all of its assets,
except that upon the written consent of Lender, any Borrower may merge with any
one or more other Borrowers provided that one of the Borrowers is the surviving
corporation.
(n) Capital Structure. Borrower shall not alter or amend its
capital structure or purchase, redeem or retire any of its shares or securities
with the exception of Equivest's proposed public offering; provided, however,
Borrower shall not issue any securities or options therefor which have the
effect of diluting Lender's Warrants, including, without limitation, as part of
any management, officer or director compensation package.
(o) Ownership and Control. Borrower shall not suffer or permit a
change (a) in the ownership of a majority of its voting stock, or (b) in the
effective control over its management, except in connection with Equivest's
proposed public offering.
(p) Dealing with Affiliates. Except as disclosed in the documents
described in Schedule A attached hereto, Borrower shall not enter into any
transaction with an Affiliate (other than with any Borrower) except on terms no
less favorable than if such transaction were an arm's length transaction with a
non-affiliated Person, excluding,
<PAGE>
however, transactions existing on the date hereof. Any such dealing with
Affiliates require the prior written consent of Lender, such consent not to be
unreasonably withheld.
(q) Investments, Loans, Advances, Guaranties and Contingent
Liabilities. Borrower shall not make or permit to remain outstanding any loan or
advance to any other Person; make or permit to remain outstanding any guarantee,
endorsement or other contingent liability, direct or indirect, in connection
with the obligations, stock or dividends of any other Person; own, purchase or
acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, any other Person; provided, that, in the
foregoing notwithstanding, any Borrower may:
(i) make and permit to remain outstanding any loans or
advances in the ordinary course of Borrower's business of making loans and
selling intervals;
(ii) own, purchase or acquire prime commercial paper rated
P-1
by Moody's Investor Services, Inc. and A-1 by Standard and Poors Corporation,
bankers acceptances of, and certificates of deposit in, the Bank or any other
United Stated federally insured commercial bank, obligations of the United
States Government or any agency thereof, and obligations guaranteed by the
United States Government, all of the foregoing in each case to become due within
one (1) year from the date of purchase;
(iii) make deposits and extensions of credit and endorse
negotiable instruments for deposit or collection, all in the ordinary course of
business; and
(iv) make and permit to remain outstanding any loans or
advances to any other Borrower.
(r) Limitations on Certain Contracts. Borrower shall not enter
into, be a party to or permit:
(i) any contract providing for the making of loans,
advances or capital contributions to any Person or for the purchase of any
property from any Person, in each case in order to enable such Person to
maintain working capital, net worth or any other balance sheet condition or to
pay debts, dividends or expenses, except in the ordinary course of Borrower's
business;
(ii) any contract for the purchase of materials, supplies
or other
property or services if such contract (or any related document) requires that
payment for such materials, supplies or other property or services shall be made
regardless of whether or not delivery of such materials, supplies or other
property or services is ever made or tendered;
(iii) any contract to rent or lease (as lessee) any real or
personal property if such contract (or any related document) provides that the
obligation to make payments thereunder is absolute and unconditional under
conditions not customarily found
<PAGE>
in commercial leases then in general use or requires that the lessee purchase or
otherwise acquire securities or obligations of the lessor;
(iv) any contract for the sale or use of materials,
supplies or other property or the rendering of services which requires that
payment for such materials, supplies or other property, or the use thereof, or
for such services shall be subordinated to any indebtedness of the purchaser
or user of such materials, supplies or other property or the Person entitled to
the benefit of such services owed or to be owed to any other person or entity;
or
(v) any other contract which, in the reasonable opinion of
Lender, in economic effect is substantially equivalent to a guarantee.
(s) Change in Business. Borrower shall not make any material
change in the nature of its business as it is being conducted as of the date
hereof.
(t) Changes in Accounting. Borrower shall not change its methods
of accounting, unless such change is permitted by GAAP, and provided such change
does not have the effect of curing or preventing what would otherwise be an
Event of Default or Default had such change not taken place.
SECTION 7. EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following occurs:
7.1 The Loan.
(a) Payment Default. If Borrower fails to make, as and when due,
whether by acceleration or otherwise, any payment of principal and/or interest
when the same is due. If Borrower fails to make, as and when due, any other
payment obligation or other fees or amounts of any and every kind hereunder or
pursuant to any of the other Loan Documents (other than a principal or interest
payment) and such payment obligation remains unpaid for a period of five (5)
days after the date such payment obligation is due.
(b) Covenant Defaults. If Borrower fails fully and timely to
perform or observe any non-monetary covenant or agreement contained in this
Agreement or in any of the other Loan Documents and such failure continues for a
period of thirty (30) days after notice of such failure is furnished by Lender;
provided, however, that if Borrower commences to cure such failure to Lender's
reasonable satisfaction within such thirty (30) day period but, because of the
nature of such failure, cure cannot be completed within thirty (30) days,
notwithstanding Borrower's good faith best efforts to do so, then, provided that
Borrower diligently seeks to complete such cure, an Event of Default shall not
be deemed to have occurred unless such failure continues for a total of sixty
(60) days after notice of such failure has been furnished by Lender as set forth
above, provided that such failure does not (i) result in substantial financial
hardship to Lender; or (ii) materially impair
<PAGE>
the value of all or any portion of the Collateral, as determined in the
reasonable judgment of Lender. Notwithstanding the foregoing, Borrower shall not
be entitled to any notice or cure rights if Borrower violates Section 6.1(q),
6.1(r) or any of the negative covenants set forth in Section 6.3 above.
(c) Warranties or Representations. If any statement or
representation made by or on behalf of Borrower in this Agreement, in any of the
other Loan Documents, or in any document, instrument, certificate, opinion, or
other item furnished pursuant to the Loan Documents, is false, misleading, or
incorrect in any material respect as of the date made or reaffirmed; provided,
however, that no Event of Default shall exist hereunder if such false,
misleading, or incorrect statement or representation was made by or on behalf of
Borrower in good faith reliance following diligent inquiry upon a document,
instrument, certificate, opinion, or other item furnished to Borrower by or on
behalf of an Applicable Underlying Borrower or an Applicable Underlying
Guarantor.
(d) Enforceability of Liens. If any Lien granted by Borrower to
Lender in connection with the Loan is or becomes invalid or unenforceable or is
not, or ceases to be, a perfected first priority Lien in favor of Lender
encumbering the asset which it is intended to encumber, and Borrower fails to
cause such Lien to become a valid, enforceable, first and prior Lien in a manner
satisfactory to Lender, in its sole discretion, within ten (10) days after
Lender delivers written notice thereof to Borrower with the sole exception of
the Debbie Reynolds Resort Loans and any participation lenders' interests
granted in certain Applicable Underlying Loans in as set forth on Exhibit "D"
attached hereto.
(e) Involuntary Proceedings. If a case is commenced or a petition
is filed against Borrower under any Debtor Relief Law, a receiver, conservator,
liquidator, or trustee of Borrower or of any material asset of Borrower is
appointed by court order and such order remains in effect for more than ninety
(90) days, or if any material asset of Borrower is sequestered by court order
and such order remains in effect for more than ninety (90) days.
(f) Voluntary Proceedings. If Borrower voluntarily seeks, consents
to, or acquiesces in the benefit of any provision of any Debtor Relief Law,
whether now or hereafter in effect, consents to the filing of any petition
against it under such law, makes an assignment for the benefit of its creditors,
admits in writing its inability to pay its debts generally as they become due,
or consents to or suffers the appointment of a receiver, trustee, liquidator, or
conservator for it or any part of its assets.
(g) Attachment; Judgment; Tax Liens. The issuance, filing, levy,
or seizure against all or any portion of the Collateral or any assets of
Borrower, of one (1) or more attachments, injunctions, executions, tax liens, or
judgments for the payment of money cumulatively in excess of $25,000, that is
not discharged in full or stayed within thirty (30) days after such issuance,
filing, levy, or seizure.
<PAGE>
(h) Going Concern Reference. If any Borrower's annual audited
financial statements required to be furnished to Lender, pursuant to Section
6.1(g) hereof, make a "going concern" reference or otherwise question such
Borrower's continuing viability as a going concern.
(i) Removal of Collateral. If Borrower conceals, removes,
transfers, conveys, assigns, or permits to be concealed, removed, transferred,
conveyed, or assigned, any of the Collateral in violation of the terms of any of
the Loan Documents or with the intent to hinder, delay, or defraud its creditors
or any of them, including, without limitation, Lender.
(j) Other Defaults. If a material default or event of default
occurs in connection with any other loans or financing arrangements that
Borrower or any of their respective Affiliates may have with Lender, including
but not limited to the Timeshare Receivables Purchase Facility, the Timeshare
Construction Credit Facility, the Timeshare Receivables Hypothecation Facility
or the Long Wharf Loan.
(k) Material Adverse Change. If there occurs any material adverse
change in the financial condition of Borrower.
(l) Minimum Net Worth Requirement. Borrower's failure for any
reason to satisfy the Minimum Net Worth Requirement.
(m) Minimum Quarterly Net Income Requirement. Borrower's failure
for any reason to satisfy the Minimum Quarterly Net Income Requirement.
(n) Default by Borrower in Other Agreements. Any default by
Borrower (i) in the payment of any indebtedness to Lender; (ii) in the payment
or performance of other indebtedness for borrowed money or obligations in excess
of $50,000 secured by all or any portion of the Collateral; or (iii) in the
payment or performance of any other material indebtedness or obligations.
(o) Violation of Negative Covenants. If either Borrower violates
any negative covenant set forth in Section 6.3 hereof.
(p) Insolvency. If either Borrower becomes insolvent or otherwise
generally unable to pay its respective debts as and when they become due or
payable.
7.2 Applicable Underlying Loans.
(a) Payment Defaults. If any Applicable Underlying Borrower (with
the sole exception of the Debbie Reynolds Resort Loan Applicable Underlying
Borrower) fails to make, as and when due, whether by acceleration or otherwise,
any payment or mandatory prepayment of principal, interest, or other fees or
amounts of any and every kind, pursuant to the Applicable Underlying Loan
Documents, and such failure continues
<PAGE>
for a period of thirty (30) days after notice of such failure is furnished by
Borrower to the Applicable Underlying Borrower, which notice shall be given by
Borrower immediately upon the Applicable Underlying Borrower's failure to make
the required payment.
(b) Loss of Eligibility. A Pledged Note Receivable ceases being an
Eligible Note Receivable for any reason.
(c) Attachment; Judgment; Tax Liens. The issuance, filing, levy,
or seizure against any Applicable Resort (with the sole exception of the Debbie
Reynolds Resort Loan) of one or more attachments, injunctions, executions, tax
liens, or judgments for the payment of money cumulatively in excess of $25,000,
that is not discharged in full, stayed, fully bonded or dismissed within
forty-five (45) days after such issuance, filing, levy, or seizure.
(d) Applicable Timeshare Documents. If any Applicable Declaration
or a timeshare regime created thereby at an Applicable Resort is amended,
restated, or terminated without Lender's prior written consent.
(e) Insolvency. If any Applicable Underlying Borrower or
Applicable Underlying Guarantor becomes insolvent or otherwise generally unable
to pay its respective debts as and when they become due or payable with the sole
exception of the Debbie Reynolds Resort Loan Applicable Underlying Borrower.
(f) Involuntary Proceedings. If a case is commenced or a petition
is filed against and Applicable Underlying Borrower or Applicable Underlying
Guarantor under any Debtor Relief Law, a receiver, conservator, liquidator, or
trustee of such Applicable Underlying Borrower or Applicable Underlying
Guarantor or of any material asset thereofis appointed by court order and such
order remains in effect for more than forty-five (45) days, or if any material
asset of an Applicable Underlying Borrower or and Applicable Underlying
Guarantor is sequestered by court order and such order remains in effect for
more than forty-five (45) days.
(g) Voluntary Proceedings. With the sole exception of the Debbie
Reynolds Resort Loan Applicable Underlying Loan, if an Applicable Underlying
Borrower or an Applicable Underlying Guarantor voluntarily seeks, consents to,
or acquiesces in the benefit of any provision of any Debtor Relief Law, whether
now or hereafter in effect, consents to the filing of any petition against it
under such law, makes an assignment for the benefit of its creditors, admits in
writing its inability to pay its debts generally as they become due, or consents
to or suffers the appointment of a receiver, trustee, liquidator, or conservator
for it or any part of its assets.
(h) Material Adverse Change. If there occurs any material adverse
change in the financial condition of any Applicable Underlying Borrower or
Applicable Underlying Guarantor (with the sole exception of the Debbie Reynolds
Resort Loan Applicable Underlying Borrower and Applicable Underlying Guarantor).
<PAGE>
(i) Enforceability. If any material term, provision, or condition
of an Applicable Underlying Loan Document becomes invalid or legally
unenforceable by Borrower and its successors and assigns, including Lender with
the sole exception of the Debbie Reynolds Resort Loans.
(j) Transfer of Property. Except for the sale of Encumbered
Intervals in the ordinary course of an Applicable Underlying Borrower's business
in accordance with the terms of the Applicable Underlying Loan Documents, and
except for transfers due to involuntary condemnation which do not render an
Applicable Resort useless for its intended purpose, if an Applicable Underlying
Borrower, without Borrower's and Lender's prior written consent, sells, conveys,
or further encumbers all or any part of its interest in the Applicable Resort or
in any of the personalty located thereon or used or intended to be used in
connection therewith. For purposes of this paragraph, an assignment, sale, or
transfer shall also include the transfer of any stock of the Applicable
Underlying Borrower other than to an existing shareholder thereof.
(k) Lien Against Applicable Resort. Except for the Permitted Liens
and Encumbrances or as otherwise specifically provided herein to the contrary,
if Borrower or an Applicable Underlying Borrower grants any mortgage, Lien, or
other encumbrance upon all or any portion of an Applicable Resort or any
Applicable Underlying Loan Collateral other than in favor of Lender in
connection with the Loan, provided that such mortgage, Lien, or other
encumbrance has a material adverse effect upon the value of such Applicable
Underlying Loan Collateral or all or any portion of the Collateral, unless
approved by Lender in writing, in its sole and absolute discretion.
(l) Title. If any violation or breach shall occur in any
agreement, covenant, or restriction affecting title to all or any portion of an
Applicable Resort, any Mortgaged Real Property, or any Encumbered Intervals,
including but not limited to any Permitted Liens and Encumbrances, and such
violation or breach is not cured within any time frame allowed under the
Applicable Underlying Loan Documents, with the sole exception of the Debbie
Reynolds Resort Loans.
Notwithstanding the foregoing provisions of this Section 7.2 to the
contrary, an Event of Default hereunder shall not be deemed to exist if within
thirty (30) days following the occurrence of any of the Defaults set forth in
this Section 7.2, Borrower pays Lender the total amount of that portion of the
Advance made by Lender in respect of the Applicable Underlying Loan as to which
such occurrence pertained, together with any accrued but unpaid interest thereon
and any other amounts advanced by or otherwise owed to Lender in connection with
such Applicable Underlying Loan. Promptly following its receipt of all such
amounts, and provided that no Default or Event of Default then exists hereunder,
Lender shall release its Lien against all Applicable Underlying Loan Collateral
that secures the Applicable Underlying Loan in question.
<PAGE>
SECTION 8. REMEDIES
8.1 Remedies Upon Default. Should an Event of Default occur, Lender may
immediately take any one (1) or more of the actions described in this Section 8,
all without notice to Borrower:
(a) Acceleration. Declare the unpaid balance of the Loan, or any
part thereof, immediately due and payable, whereupon the same shall be due and
payable to Lender.
(b) Termination of Lender's Obligation. Terminate Lender's further
performance under this Agreement and/or any other document or instrument to
which Lender and Borrower (or any other Affiliate of Borrower) are parties (if
permitted pursuant to the terms of such documents), without further liability or
obligation to Borrower, to the extent Lender shall deem appropriate, in its sole
discretion, all without notice to Borrower.
[?]
(c) Termination of Obligation to Grant Partial Releases. Cease
granting or authorizing any Applicable Underlying Borrower partial releases from
the Lien of an Applicable Mortgage if a default or event of default has occurred
with respect to the Applicable Underlying Loan Documents.
(d) Judgment. Reduce Lender's claim to judgment, foreclose, or
otherwise enforce each and every assignment of an Applicable Mortgage and/or any
other Lien or security interest in all or any part of the Collateral by any
available judicial or other procedure under law. Lender's right to sue and
recover a judgment, either before, after, or during the pendency of any
proceeding for the enforcement of the Applicable Mortgage, and the right of
Lender to recover such judgment shall not be affected by any taking, possession,
or foreclosure sale hereunder or by the exercise of any other right, power, or
remedy for the enforcement of the terms of the Applicable Mortgage or the
foreclosure of the Lien thereof.
(e) Sale of Collateral. Subject to the Custodial Agreement or to
the rights of any participating lenders in the Applicable Underlying Loans as
set forth on Exhibit "D" hereto, exercise all the rights and remedies of a
secured party under the Code (whether or not the Code applies to the affected
Collateral), including (i) require Borrower to, and Borrower hereby agrees that
it will, at its expense and upon request of Lender forthwith, assemble all or
part of the Collateral as directed by Lender and make it available to Lender at
a place to be designated by Lender that is reasonably convenient to both
parties; (ii) enter upon any premises of Borrower and take possession of the
Collateral; and (iii) sell the Collateral or any part thereof in one (1) or more
parcels at public or private sale, at any of Lender's offices or elsewhere, at
such time or times, for cash, on credit, or for future delivery, and at such
price or prices and upon such other terms as Lender may deem commercially
reasonable. Borrower agrees that, to the extent notice of sale shall be required
by law, ten (10) days notice of the time and place of any sale shall constitute
reasonable notification. At any sale of the Collateral, if permitted by law,
Lender may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) for the
<PAGE>
purchase of the Collateral or any portion thereof for the account of Lender.
Borrower shall remain liable for any deficiency. Lender shall not be required to
proceed against any Collateral but may proceed against Borrower directly. To the
extent permitted by law, Borrower hereby specifically waives all rights of
redemption, stay, or appraisal that it has or may have under any law now
existing or hereafter enacted.
(f) Retention of Collateral. At its discretion, retain such
portion of the Collateral as shall aggregate in value to an amount equal to the
total amount owed by the Borrower pursuant to the Loan Documents, in
satisfaction of the Obligations, whenever the circumstances are such that Lender
is entitled and elects to do so under applicable law, subject to the rights of
any participating lenders in the certain Applicable Underlying Loans as set
forth on Exhibit "D" attached hereto.
(g) Purchase of Collateral. Subject to the Custodial Agreement or
to the rights of any participating lenders in the Applicable Underlying Loans as
set forth on Exhibit "D" attached hereto, buy all or any part of the Collateral
at any public or private sale.
(h) Exercise of Other Rights. Lender shall have all the rights and
remedies of a secured party under the Code and other legal and equitable rights
to which it may be entitled, including, without limitation, and without notice
to Borrower, the right to continue to collect all payments made on the Pledged
Notes Receivable and to apply such payments to the Obligations, subject to the
Custodial Agreement or to the rights of any participating lenders in the
Applicable Underlying Loans as set forth on Exhibit "D" attached hereto, and to
sue in its own name as Applicable Underlying Borrower or other maker of any
defaulted Pledged Note Receivable. Lender may also exercise any and all other
rights or remedies afforded by any other Applicable Laws or by the Loan
Documents or, in the name and stead of Borrower, the Applicable Underlying Loan
Documents, as Lender shall deem appropriate, at law, in equity, or otherwise,
including but not limited to the right to bring suit or other proceeding, either
for specific performance of any covenant or condition contained in the Loan
Documents or the Applicable Underlying Loan Documents or in aid of the exercise
of any right or remedy granted to Lender in the Loan Documents subject to the
Custodial Agreement or to the rights of any participating lenders in the
Applicable Underlying Loans as set forth on Exhibit "D" hereto. Subject to the
rights of any participating lenders in certain Applicable Underlying Loans as
set forth on Exhibit "D" hereto, Lender shall also have the right to require
Borrower to assemble any of the Collateral not in Lender's possession, at
Borrower's expense, and make it available to Lender at a place to be determined
by Lender that is reasonably convenient to both parties, and Lender shall have
the right to take immediate possession of all or any portion of the Collateral
or Applicable Underlying Loan Collateral and may enter any Applicable Resort or
any of the premises of Borrower or an Applicable Underlying Borrower or wherever
the Collateral or Applicable Underlying Loan Collateral shall be located, with
or without process of law wherever the Collateral or Applicable Underlying Loan
Collateral may be, and, to the extent such premises are not the property of
Lender, to keep and store the same on said premises until sold (and if said
premises be the property of Borrower,
<PAGE>
Borrower agrees not to charge Lender for use and occupancy, rent, or storage of
the Collateral, for a period of at least sixty (60) days after sale or
disposition of the Collateral or Applicable Underlying Loan Collateral).
8.2 Notice of Sale. Subject to the Custodial Agreement or to the rights
of any participating lenders in certain Applicable Underlying Loans as set forth
on Exhibit "D" hereto, reasonable notification of the time and place of any
public sale of the Collateral or reasonable notification of the time after which
any private sale or other intended disposition of the Collateral is to be made
shall be sent to Borrower and to any other Person entitled under the Code to
notice; provided, however, that if the Collateral threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Lender may
sell or otherwise dispose of the Collateral without advertisement or other
notice of any kind. It is agreed that notice sent not less than ten (10)
calendar days prior to the taking of the action to which such notice relates is
reasonable notification and notice for the purposes of this Section 8.2. Lender
shall have the right to bid at any public or private sale on its own behalf. Out
of money arising from any such sale, Lender shall retain an amount equal to all
costs and charges, including attorneys' fees, that it has incurred or may incur
for advice, counsel, or other legal services or for pursuing, reclaiming,
seeking to reclaim, taking, keeping, removing, storing, and advertising such
Collateral for sale, selling same, and any and all other charges and expenses in
connection therewith and in satisfying any prior Liens thereon. Any balance
shall be applied against the Obligations, and in the event of deficiency,
Borrower shall remain liable to Lender. In the event of any surplus, such
surplus shall be paid to Borrower or to such other Persons as may be legally
entitled to such surplus. If, by reason of any suit or proceeding of any kind,
nature, or description against Borrower, or by Borrower or any other party
against Lender, which in Lender's sole discretion makes it advisable for Lender
to seek counsel for the protection and preservation of its Liens and security
interests, or to defend its own interest, such expenses and counsel fees shall
be allowed to Lender, and the same shall be made a further charge and Lien upon
the Collateral.
In view of the fact that federal and state securities laws may impose
certain restrictions on the methods by which a sale of certain Collateral may be
effected after an Event of Default, Borrower agrees that upon the occurrence or
existence of an Event of Default, Lender may, subject to the Custodial Agreement
or to the rights of any participating lenders is the Applicable Underlying Loans
as set forth on Exhibit "D" hereto, from time to time, attempt to sell all or
any part of such Collateral by means of a private placement restricting the
bidding and prospective purchasers to those who will represent and agree that
they are purchasing for investment only and not for, or with a view to,
distribution. In so doing, Lender may solicit offers to buy such Collateral, or
any part of it for cash, from a limited number of investors deemed by Lender, in
its reasonable judgment, to be responsible parties who might be interested in
purchasing the Collateral, and if Lender solicits such offers from not less than
two (2) such investors, then the acceptance by Lender of the highest offer
obtained therefrom shall be deemed to be a commercially reasonable method of
disposition of such Collateral.
<PAGE>
8.3 Application of Collateral; Termination of Agreements. Upon the
occurrence of any Event of Default, Lender may, with or without proceeding with
such sale or foreclosure or demanding payment or performance of the Obligations,
without notice, terminate Lender's further performance under this Agreement or
any other agreement or agreements between Lender and Borrower or any Affiliate
of Borrower, without further liability or obligation by Lender, and may also,
subject to the rights of participating lenders in the Applicable Underlying
Loans as set forth on Exhibit "D" attached hereto, at any time, appropriate and
apply on any Obligations any and all Collateral in its, Custodian's, or Lockbox
Agent's possession, custodian, or control any and all balances, credits,
deposits, accounts, reserves, indebtedness, or other monies due or owing to
Borrower held by Lender hereunder or under any other financing agreement or
otherwise, whether accrued or not. Neither such termination, nor the termination
of this Agreement by lapse of time, the giving of notice, or otherwise, shall
absolve, release, or otherwise affect the liability of Borrower in respect of
transactions prior to such termination, or affect any of the Liens, security
interests, rights, powers, and remedies of Lender, but they shall, in all
events, continue until all of the Obligations have been satisfied in full.
8.4 Rights of Lender Regarding Collateral. In addition to all other
rights possessed by Lender under the Loan Documents or otherwise, Lender, at its
option, may from time to time after there shall have occurred an Event of
Default, and for so long as such Event of Default remains uncured, in its sole
discretion, subject to the Custodial Agreement or to the rights of any
participating lenders in the Applicable Underlying Loans as set forth on Exhibit
"D" hereto, take the following actions:
(a) Transfer all or any part of the Collateral into the name of
Lender or its nominee;
(b) Take control of the proceeds of any of the Collateral;
(c) Extend or renew the Loan and grant releases, compromises, or
indulgences with respect to the Obligations, any portion thereof, any extension,
or renewal thereof, or any security therefor, to any obligor hereunder or
thereunder; and
(d) Exchange certificates or instruments representing or
evidencing the Collateral for certificates or instruments of smaller or larger
denominations for any purpose consistent with the terms of this Agreement.
8.5 Delegation of Duties and Rights. Lender may perform any of its duties
and/or exercise any of its rights or remedies under the Loan Documents by or
through its officers, directors, employees, attorneys, agents, or other
representatives. To the maximum extent practicable in light of all relevant
facts and circumstances, Lender will attempt to avoid any duplication of effort
and cost to Borrower in connection with any such delegation on Lender's part.
<PAGE>
8.6 Lender Not in Control. None of the covenants or other provisions
contained in this Agreement or in any other Loan Document shall give or be
interpreted as giving Lender the right or power to exercise control over the
affairs and/or management of Borrower.
8.7 Waivers. The acceptance by Lender at any time and from time to time
of partial payments of the Loan or performance of the Obligations shall not be
deemed to be a waiver of any Event of Default then existing. No waiver by Lender
of any Event of Default shall be deemed to be a waiver of any other or
subsequent Event of Default. No delay or omission by Lender in exercising any
right or remedy under the Loan Documents shall impair such right or remedy or be
construed as a waiver thereof or an acquiescence therein, nor shall any single
or partial exercise of any such right or remedy preclude other or further
exercises thereof, or the exercise of any other right or remedy under the Loan
Documents or otherwise. Further, except as otherwise expressly provided in this
Agreement or by applicable law, Borrower and each and every surety, endorser,
guarantor, and other party liable for the payment or performance of all or any
portion of the Obligations, severally waive notice of the occurrence of any
Default, Event of Default, presentment, and demand for payment, protest, and
notice of protest, notice of intention to accelerate, acceleration, and
nonpayment, and agree that their liability shall not be affected by any renewal
or extension in the time of payment of the Loan, or by any release or change in
any security for the payment or performance of the Loan, regardless of the
number of such renewals, extensions, releases, or changes.
8.8 Cumulative Rights. All rights and remedies available to Lender under
the Loan Documents shall be cumulative of and in addition to all other rights
and remedies granted to Lender under any of the Loan Documents, at law, or in
equity, whether or not the Loan is due and payable and whether or not Lender
shall have instituted any suit for collection or other action in connection with
or pursuant to the Loan Documents.
8.9 Expenditures by Lender. Any amounts expended by or on behalf of
Lender pursuant to the exercise of any right or remedy provided herein or
available at law or in equity shall become part of the Obligations and shall
bear interest at the Default Rate from the date of such expenditure until the
date repaid.
8.10 Diminution in Value of Collateral. Lender shall not have any
liability or responsibility whatsoever for any diminution or loss in value of
any of the Collateral or Applicable Underlying Loan Collateral, specifically
including that which may arise from Lender's negligence or inadvertence, whether
such negligence or inadvertence is the sole or contributing cause of any damage.
SECTION 9. CERTAIN RIGHTS OF LENDER
9.1 Protection of Collateral. Lender may, at any time and from time to
time, take such actions as Lender deems necessary or appropriate to protect
Lender's Liens and security interests in and to preserve the Collateral, and to
establish, maintain, and protect
<PAGE>
the enforceability of Lender's rights with respect thereto, all at the expense
of Borrower. Borrower agrees to cooperate fully with all of Lender's efforts to
preserve the Collateral and Lender's Liens, security interests, and rights and
will take such actions to preserve the Collateral and Lender's Liens, security
interests, and rights as Lender may direct, including, without limitation, by
promptly paying, upon Lender's demand therefor, all documentary stamp taxes or
other taxes other than franchise taxes, taxes on capital, gross receipts taxes
and taxes imposed on net income that may be or may become due in respect of any
of the Collateral. All of Lender's expenses of preserving the Collateral and its
Liens and security interests and rights therein shall be added to the principal
amount of the Loan and secured by the Collateral.
9.2 Performance by Lender. IF BORROWER FAILS TO PERFORM ANY AGREEMENT
CONTAINED HEREIN, LENDER MAY ITSELF PERFORM, OR CAUSE THE PERFORMANCE OF, SUCH
AGREEMENT, AND THE EXPENSES OF LENDER INCURRED IN CONNECTION THEREWITH SHALL BE
PAYABLE BY BORROWER UNDER SECTION 9.5 BELOW. IN NO EVENT, HOWEVER, SHALL LENDER
HAVE ANY OBLIGATION OR DUTY WHATSOEVER TO PERFORM ANY COVENANT OR AGREEMENT OF
BORROWER OR ANY APPLICABLE UNDERLYING BORROWER CONTAINED HEREIN OR IN ANY OF THE
OTHER LOAN DOCUMENTS, ANY APPLICABLE UNDERLYING LOAN DOCUMENTS, OR ANY
APPLICABLE TIMESHARE DOCUMENTS, AND ANY SUCH PERFORMANCE BY LENDER SHALL BE
WHOLLY DISCRETIONARY WITH LENDER. THE PERFORMANCE BY LENDER OF ANY AGREEMENT OR
COVENANT OF BORROWER OR ANY APPLICABLE UNDERLYING BORROWER ON ANY OCCASION SHALL
NOT GIVE RISE TO ANY DUTY ON THE PART OF LENDER TO PERFORM ANY SUCH AGREEMENTS
OR COVENANTS ON ANY OTHER OCCASION OR AT ANY TIME. IN ADDITION, BORROWER
ACKNOWLEDGES THAT LENDER SHALL NOT AT ANY TIME OR UNDER ANY CIRCUMSTANCES
WHATSOEVER HAVE ANY DUTY TO BORROWER OR TO ANY OTHER PERSON TO EXERCISE ANY OF
LENDER'S RIGHTS OR REMEDIES HEREUNDER.
------------ ------------- -------------
Initial Initial Initial
9.3 No Liability of Lender. Lender is obligated to perform all covenants
and obligations of Lender hereunder, subject to all of the terms, provisions,
and conditions hereof and of the other Loan Documents. However, neither the
acceptance of this Agreement by Lender nor the exercise of any rights hereunder
by Lender shall be construed in any way as an assumption by Lender of any
obligations, responsibilities, or duties of Borrower or any Applicable
Underlying Borrower arising in connection with any Applicable Resort, all or any
portion of the Collateral or Applicable Underlying Loan Collateral, under any
Applicable Timeshare Documents, or under any Applicable Laws, or in connection
with any other business of Borrower or the Collateral, nor shall it otherwise
bind Lender to the performance of any obligations with respect to an Applicable
Resort, the Collateral, or any Applicable Underlying Loan Collateral, it being
expressly understood
<PAGE>
that Lender shall not be obligated to perform, observe, or discharge any
obligation, responsibility, duty, or liability of Borrower or any Applicable
Underlying Borrower with respect to any Applicable Resort, any of the
Collateral, any of the Applicable Underlying Loan Collateral, under any of the
Applicable Timeshare Documents, or under any Applicable Laws, including but not
limited to appearing in or defending any action, expending any money, or
incurring any expense in connection therewith. Without limiting the foregoing,
neither this Agreement, any action or actions on the part of Lender taken
hereunder nor the acquisition of the Pledged Notes Receivable and/or the other
Collateral by Lender prior to or following the occurrence of an Event of Default
shall constitute an assumption by Lender of any obligations of Borrower with
respect to an Applicable Resort or such Collateral, or any documents or
instruments executed in connection therewith, including but not limited to the
Applicable Underlying Loan Documents, and Borrower shall continue to be liable
for all of its obligations thereunder or with respect thereto. Borrower hereby
agrees to indemnify, protect, defend, and hold Lender harmless from and against
any and all claims, demands, causes of action, losses, damages, liabilities,
suits, costs, and expenses, including, without limitation, attorneys' fees and
court costs, asserted against or incurred by Lender by reason of, arising out
of, or connected in any way with (i) any failure or alleged failure of Borrower
to perform any of its covenants or obligations with respect to an Applicable
Resort or all or any portion of the Collateral or Applicable Underlying Loan
Collateral; (ii) a breach of any certification, representation, warranty, or
covenant of Borrower set forth in any of the Loan Documents; (iii) the ownership
of the Pledged Notes Receivable, the other Collateral, and the rights, titles,
and interests assigned hereby, or intended so to be; (iv) the debtor-creditor
relationships between Borrower, on the one hand, and the Applicable Underlying
Borrowers or Lender, as the case may be, on the other; or (v) the Pledged Notes
Receivable, the Applicable Mortgages, or the management or operation of the
Applicable Resorts. The obligations of Borrower to indemnify, protect, defend,
and hold Lender harmless as provided in this Agreement are absolute,
unconditional, present, and continuing, and shall not be dependent upon or
affected by the genuineness, validity, regularity, or enforceability of any
claim, demand, or suit from which Lender is indemnified. The indemnity
provisions in this Section 9.3 shall survive the complete satisfaction of the
Obligations and the termination of this Agreement and remain binding and
enforceable against Borrower, together with its successors and assigns. Borrower
hereby waives all notices with respect to any losses, damages, liabilities,
suits, costs, and expenses, and all other demands whatsoever hereby indemnified,
and agrees that its obligations under this Agreement shall not be affected by
any circumstances, whether or not referred to above, that might otherwise
constitute legal or equitable discharges of its obligations hereunder. If a
court of competent jurisdiction should determine that Borrower is entitled to
recover damages from Lender for any reason or upon any cause, claim, or
counterclaim, in connection with the Loan or the transactions provided for or
contemplated pursuant to this Agreement or the other Loan Documents, Borrower
stipulates and agrees that any such damages or awards shall be limited to the
amount of the Warrants plus $150,000, or any portion thereof but only to the
extent such $150,000 or any portion thereof is actually paid to Lender by
Borrower at Closing, and in no event shall Lender be liable to Borrower for any
other amounts, including, without limitation, consequential exemplary or
punitive damages, all of which are hereby waived by Borrower. The Borrower
agrees that the limitation on damages
<PAGE>
hereunder is reasonable under the circumstances existing at the time this
Agreement is entered into and that the precise amount of damages is extremely
difficult and impractical to calculate. Notwithstanding the foregoing, Borrower
shall not indemnify or hold Lender harmless as set forth herein, in the event
any liabilities, claims, demands, losses, damages, costs or expenses are as a
direct result of Lender's gross negligence or willful misconduct with respect to
the Loan or the Loan Documents.
9.4 Right to Defend Action Affecting Security. Lender may, at Borrower's
expense, appear in and defend any action or proceeding, at law or in equity,
that Lender in good faith believes may affect the Liens or security interests
granted under this Agreement, including, without limitation, with respect to the
Pledged Notes Receivable, the Applicable Mortgages, the value of the Collateral,
or Lender's rights under any of the Loan Documents.
9.5 Expenses. All expenses payable by Borrower under any provision of
this Agreement shall be Obligations of Borrower, and if paid by Lender, shall be
repaid by Borrower to Lender, upon demand, and shall bear interest at the
Default Rate from the date of payment of such expense(s) by Lender until repaid
by Borrower.
9.6 Lender's Right of Set-Off. As additional security for the payment,
performance and discharge of the Obligations, Borrower hereby pledges to the
Lender, grants the Lender a security interest in, and gives to the Lender a
first priority lien upon and a right of set off against, all cash and other
deposit balances now or hereafter arising in any of the Borrower's accounts with
the Lender and all Collateral or proceeds thereof held by Lender.
9.7 Right of Lender to Extend Time of Payment, Substitute, Release
Security, Etc. Without affecting the liability of any Person or entity,
including, without limitation, any Applicable Underlying Borrower, for the
payment of any of the Obligations and without affecting or impairing Lender's
Lien and other rights in and to the Collateral, or the remainder thereof, as
security for the full amount of the Loan unpaid and the Obligations, Lender may
from time to time, without notice: (a) release any Person liable for the payment
of the Loan; (b) extend the time or otherwise alter the terms of payment of the
Loan; (c) accept additional security for the Obligations of any kind, including
deeds of trust or mortgages and security agreements; (d) alter, substitute, or
release any property securing the Obligations; (e) realize upon any Collateral
for the payment of all or any portion of the Loan as provided herein in such
order and manner as it may deem fit; and/or (f) join in any subordination or
other agreement affecting this Agreement or the lien or charge thereof.
9.8 Assignment of Lender's Interest. Lender shall have the right to
assign the Loan and all or any portion of its rights in or pursuant to this
Agreement or any of the other Loan Documents to any subsequent holder or holders
of the Note or the Obligations that assumes Lender's obligations hereunder and
is a bank, pension fund, insurance company, or other institutional investor.
<PAGE>
9.9 Notice to Purchaser. Borrower authorizes Lender (but neither Lender,
Servicing Agent nor Lockbox Agent shall be obligated) to communicate at any time
and from time to time with any Applicable Underlying Borrower or any other
Person primarily or secondarily liable under a Pledged Note Receivable with
regard to the Lien of the Lender thereon and any other matter relating thereto,
and by no later than the Closing Date, Borrower shall deliver to Lender
notifications to the Applicable Underlying Borrowers executed in blank by
Borrower and in form acceptable to Lender, pursuant to which the Applicable
Underlying Borrowers (or other obligors) are directed to remit all payments in
respect of the Collateral to Lockbox Agent or as Lender may otherwise require.
9.10 Collection of the Notes. Borrower hereby directs and authorizes each
Applicable Underlying Borrower and other Person liable for the payment of any
Pledged Note Receivable, and promptly after the Closing Date, shall direct in
writing each such Person, to pay each installment thereon to Lockbox Agent,
pursuant to the Lockbox Agreement, unless and until directed otherwise by
written notice from Lender or, at Lender's direction, from Borrower, after which
such parties are and shall be directed to make all further payments on the
Pledged Notes Receivable in accordance with the directions of Lender. Following
the occurrence of an Event of Default, Lender shall have the right to require
that all payments becoming due under the Pledged Notes Receivable be paid
directly to Lender, and Lender is hereby authorized to receive, collect, hold,
and apply the same in accordance with the provisions of this Agreement but shall
provide Borrower with accountings of all such activity on at least as frequent a
basis as Lockbox Agent was obligated to provide accountings to Lender and
Borrower, pursuant to the Lockbox Agreement. In the event that following the
occurrence of an Event of Default, Lender or Lockbox Agent does not receive any
installment of principal or interest due and payable under any of the Pledged
Notes Receivable on or prior to the date upon which such installment becomes
due, Lender may, at its election (but without any obligation to do so), give or
cause Lockbox Agent to give notice of such event of default to the defaulting
party or parties, and Lender shall have the right (but not the obligation),
subject to the terms of such Notes, to accelerate payment of the unpaid balance
of any of the Pledged Notes Receivable in default and to foreclose each of the
Applicable Mortgages securing the payment thereof, and to enforce any other
remedies available to the holder of such Pledged Notes Receivable with respect
to such event of default. Borrower hereby further authorizes, directs, and
empowers Lender (and Lockbox Agent or any other Person as may be designated by
Lender in writing) to collect and receive all checks and drafts evidencing such
payments and to endorse such checks or drafts in the name of Borrower and, upon
such endorsements, to collect and receive the money therefor. The right to
endorse checks and drafts granted pursuant to the preceding sentence is
irrevocable by Borrower, and the banks or banks paying such checks or drafts
upon such endorsements, as well as the signers of the same, shall be as fully
protected as though the checks or drafts had been endorsed by Borrower.
9.11 Power of Attorney. Borrower does hereby irrevocably constitute and
appoint Lender as Borrower's true and lawful agent and attorney-in-fact, with
full power of
<PAGE>
substitution, for Borrower and in Borrower's name, place, and stead, or
otherwise, to (a) endorse any checks or drafts payable to Borrower in the name
of Borrower and in favor of Lender as provided in Section 9.10 above; (b) to
demand and receive from time to time any and all property, rights, titles,
interests, and Liens hereby sold, assigned, and transferred, or intended so to
be, and to give receipts for same; (c) upon an Event of Default, to collect all
rent, revenues, and income, pursuant to the terms of any Applicable Mortgage;
(d) from time to time, to institute and prosecute, in Lender's own name, any and
all proceedings at law, in equity, or otherwise, that Lender may deem proper in
order to collect, assert, or enforce any claim, right, or title, of any kind, in
and to the property, rights, titles, interests, and Liens hereby sold, assigned,
or transferred, or intended so to be, and to defend and compromise any and all
actions, suits, or proceedings in respect of any of the said property, rights,
titles, interests, and Liens; (e) upon an Event of Default, to change Borrower's
post office mailing address; and (f) generally to do all and any such acts and
things in relation to the Collateral as Lender shall in good faith deem
advisable. Borrower hereby declares that the appointment made and the powers
granted pursuant to this Section 9.11 are coupled with an interest and are and
shall be irrevocable by Borrower in any manner, or for any reason, unless and
until a release of the same is executed by Lender or all Obligations of Borrower
have been paid in full.
9.12 Relief from Automatic Stay, Etc. To the fullest extent permitted by
law, in the event that Borrower shall make application for or seek relief or
protection under the federal bankruptcy code (the "Bankruptcy Code") or any
other Debtor Relief Laws, or in the event that any involuntary petition is filed
against the Borrower under such Code or other Debtor Relief Laws and not
dismissed with prejudice within forty-five (45) days, the automatic stay
provisions of Section 362 of the Bankruptcy Code are hereby modified as to
Lender to the extent necessary to implement the provisions hereof permitting
set-off and the filing of financing statements or other instruments or
documents; and Lender shall automatically and without demand or notice (each of
which is hereby waived by Borrower) be entitled to immediate relief from any
automatic stay imposed by Section 362 of the Bankruptcy Code or otherwise, on or
against the exercise of the rights and remedies otherwise available to Lender as
provided in the Loan Documents. In addition, in the event that relief is sought
by or against Borrower under the Bankruptcy Code, Borrower agrees not to seek,
directly or indirectly, in any ensuing bankruptcy proceeding, any extension of
the exclusivity period otherwise available to a debtor under the Bankruptcy
Code, including, without limitation, the exclusivity period provided for under
Section 1121(b) of the Bankruptcy Code.
9.13 Investigations and Inquiries. Borrower hereby authorizes Lender to
conduct such investigations and inquiries concerning Borrower, the Applicable
Resorts, the Applicable Underlying Borrowers, the Applicable Underlying
Guarantors, the Collateral, and the Applicable Underlying Loan Collateral as
Lender shall, in its sole discretion, deems necessary or desirable in connection
with its monitoring of the Loan and the Collateral therefor, and all such
Persons of whom Lender may make such inquiry are empowered to cooperate with,
and to provide all requested information to, Lender.
<PAGE>
9.14 Verification of Use. Lender shall be under no duty or obligation to
ascertain the manner in which Borrower or any Applicable Underlying Borrower has
used or will use the proceeds of the Loan or those of any Applicable Underlying
Loan. Lender's sole obligation shall be to advance the proceeds of the Loan
subject to, and in strict accordance with, the terms, provisions, and conditions
of this Agreement and the other Loan Documents. Lender's obligation to fund the
Loan is limited to the principal amount set forth herein and in the Note.
Borrower is solely responsible for obtaining any other financing that may be
necessary in order to enable it to fund the Applicable Underlying Loans or to
repay the Loan on or prior to the Maturity Date. It is expressly understood that
Lender has no responsibility or obligation whatsoever to provide to Borrower any
further financing, whether in connection with the Applicable Underlying Loans or
otherwise.
SECTION 10. TERM OF AGREEMENT
This Agreement shall continue in full force and effect, and the Liens and
security interests granted hereby and the duties, covenants, and liabilities of
Borrower hereunder, and all the terms, conditions, and provisions hereof
relating thereto shall continue to be fully operative until all of the
Obligations have been satisfied in full. Borrower expressly agrees that if
Borrower makes a payment to Lender, which payment or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, or
otherwise required to be repaid to a trustee, receiver, or any other party under
any Debtor Relief Laws, state or federal law, common law, or equitable cause,
then to the extent of such repayment, the Obligations or any part thereof
intended to be satisfied and the Liens and security interests provided for
hereunder securing the same shall be revived and continued in full force and
effect as if said payment had not been made.
SECTION 11. MISCELLANEOUS
11.1 Notices. All notices, requests, and other communications to either
party hereunder shall be in writing and shall be given to such party at its
address set forth below or at such other address as such party may hereafter
specify for the purpose of notice to Lender or Borrower. Each such notice,
request, or other communication shall be effective (a) if given by mail, when
such notice is deposited in the United States Mail with first class postage
prepaid, and addressed as aforesaid, provided that such mailing is by registered
or certified mail, return receipt requested; (b) if given by overnight delivery,
when deposited with a nationally recognized overnight delivery service such as
Federal Express or Airborne, with all fees and charges prepaid, addressed as
provided below; or (c) if given by any other means, when delivered at the
address specified in this Section 11.1:
If to Borrower: Resort Funding, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Lisa M. Henson, Vice President
<PAGE>
With a copy to: Resort Funding, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Eric C. Cotton, Esq., General Counsel
If to Borrower: Equivest Finance, Inc.
Two Clinton Square
Syracuse, New York 13202
Attention: Eric C. Cotton, Esq., General Counsel
If to Borrower: Eastern Resorts Company, LLC
115 Long Wharf
Newport, Rhode Island 02840
Attention: R. Perry Harris
If to Borrower: Eastern Resorts Corporation
Two Clinton Square
Syracuse, New York 13202
Attn: Eric C. Cotton, Esq., General Counsel
If to Lender: Credit Suisse First Boston Mortgage Capital LLC
11 Madison Avenue
New York City, New York 10010-3629
Attention: Michael C. Szwajkowski,
Vice President
11.2 Survival. All representations, warranties, covenants, and agreements
made by Borrower herein, in the other Loan Documents, or in any other agreement,
document, instrument, or certificate delivered by or on behalf of Borrower under
or pursuant to the Loan Documents shall be considered to have been relied upon
by Lender and shall survive the delivery to Lender of such Loan Documents (and
each part thereof), regardless of any investigation made by or on behalf of
Lender.
11.3 Governing Law. THIS AGREEMENT AND THE OTHER LOAN DOCU MENTS (EXCEPT
AS MAY BE EXPRESSLY PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUSIVE OF ITS
CHOICE OF LAWS PRINCIPLES. BORROWER AND LENDER EACH HEREBY AGREES TO ACCEPT THE
STATE COURTS LOCATED IN NEW YORK COUNTY, NEW YORK, AS HAVING PROPER JURISDICTION
AND BEING THE PROPER VENUE FOR ANY LEGAL PROCEEDINGS ARISING OUT OF THE LOAN
DOCUMENTS.
11.4 Consent to Jurisdiction, Etc. The Borrower irrevocably submits to
the jurisdiction of any state or federal court sitting in the City of New York,
State of New York over any suit, action or proceeding arising out of or relating
to this Agreement, the Note or any of the other Loan Documents. The Borrower
irrevocably waives, to the fullest extent
<PAGE>
permitted by law, any objection that it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum. Final judgment in any such suit,
action or proceeding brought in any such court shall be conclusive and binding
upon the Borrower and may be enforced in any court to the jurisdiction of which
the Borrower is subject, by a suit upon such judgment, provided that service of
process is effected upon the Borrower in one of the manner specified in this
Section 11.4 or as otherwise permitted by law. The Borrower hereby irrevocably
designates and appoints its registered agent in New York as the Borrower's
authorized agent to receive on Borrower's behalf service of any and all process
that may be served in any suit, action or proceeding of the nature referred to
in this Section 11.4 in any state or federal court sitting in New York, New
York. If such agent shall cease so to act, the Borrower shall irrevocably
designate and appoint without delay another such agent in the State of New York
satisfactory to the Lender and shall promptly deliver to the Lender evidence in
writing of such other agent's acceptance of such appoint and its agreement that
such appointment shall be irrevocable. The Borrower hereby consents to process
being served in any suit, action or proceeding of the nature referred to in this
Section 11.4 by (a) the mailing of a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to the Borrower at the
Borrower's address set forth herein, and (b) serving a copy thereof upon the
agent, if any, designated and appointed by the Borrower as the Borrower's agent
for service of process by or pursuant to this Section 11.4. The Borrower
irrevocably agrees that such service (a) shall be deemed in every respect
effective service of process upon the Borrower in any such suit, action or
proceeding, and (b) shall, to the fullest extent permitted by law, be taken and
held to the valid personal service upon the Borrower. Nothing in this Section
11.4 shall affect the right of the Lender to serve process in any manner
otherwise permitted by law or limit the right of the Lender otherwise permitted
by law or limit the right of the Lender otherwise to bring proceedings against
the Borrower in the courts of any jurisdiction or jurisdictions.
11.5 Limitation on Interest. Lender and Borrower intend to comply at all
times with all applicable usury laws. All agreements between Lender and
Borrower, whether now existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency, whether by reason of demand or
acceleration of the maturity of the Note or otherwise, shall the interest
contracted for, charged, received, paid, or agreed to be paid to Lender exceed
the highest lawful rate permissible under applicable usury laws. If, from any
circumstance whatsoever, fulfillment of any provision hereof, of the Note, or of
any other Loan Documents shall involve transcending the limit of such validity
prescribed by any law which a court of competent jurisdiction may deem
applicable hereto, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if from any circumstance Lender shall
ever receive anything of value deemed interest by applicable law that would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the principal of the Loan and not to the
payment of interest, or if such excessive interest exceeds the unpaid balance of
principal of the Loan, such excess shall be refunded to Borrower. All interest
paid or agreed to be paid to Lender shall, to the extent permitted by applicable
law, be amortized,
<PAGE>
prorated, allocated, and spread throughout the full period until payment in full
of the principal so that the interest on the Loan for such full period shall not
exceed the highest lawful rate. Borrower agrees that in determining whether or
not any interest payment under the Loan Documents exceeds the highest lawful
rate, any non-principal payment (except payments specifically described in the
Loan Documents as "interest"), including without limitation, prepayment fees and
late charges, shall, to the maximum extent not prohibited by law, be deemed an
expense, fee, premium, or penalty rather than interest. Lender hereby expressly
disclaims any intent to contract for, charge, or receive interest in an amount
that exceeds the highest lawful rate. The provisions of the Note, this
Agreement, and all other Loan Documents are hereby modified to the extent
necessary to conform with the limitations and provisions of this Section, and
this Section shall govern over all other provisions in any document or agreement
now or hereafter existing. This Section shall never be superseded or waived
unless there is a written document executed by Lender and Borrower expressly
declaring the usury limitation of this Agreement to be null and void, and no
other method or language shall be effective to supersede or waive this
paragraph.
11.6 Invalid Provisions. If any provision of this Agreement or any of the
other Loan Documents is held to be illegal, invalid, or unenforceable under
present or future laws effective during the term thereof, such provision shall
be fully severable, this Agreement and the other Loan Documents shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof or thereof, and the remaining provisions
hereof or thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom. Any provision of this Agreement or any other Loan Document that is
held to be illegal, invalid, or unenforceable in a particular Applicable
Jurisdiction shall remain valid and enforceable in all other Applicable
Jurisdictions. Furthermore, in lieu of any such illegal, invalid, or
unenforceable provision, there shall be added automatically as a part of this
Agreement and/or the other Loan Documents (as the case may be) a provision as
similar in terms to such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid, and enforceable.
11.7 Successors and Assigns. This Agreement and the other Loan Documents
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns; provided, however, that Borrower may not
transfer or assign any of its rights or obligations under this Agreement, the
Commitment, or the other Loan Documents without the prior written consent of
Lender, which consent may be granted or withheld in Lender's sole and absolute
discretion. This Agreement and the transactions provided for or contemplated
hereunder or under any of the other Loan Documents are intended solely for the
benefit of the parties hereto. No third party shall have any rights or derive
any benefits under or with respect to this Agreement, the Commitment, or the
other Loan Documents except as specifically set forth herein or otherwise
provided in a written document signed by Borrower and Lender. In particular,
Lender makes no representation and assumes no obligation as to third parties
concerning the quality of the construction of the Financed Improvements by any
Applicable Underlying Borrower or the
<PAGE>
absence therefrom of defects. In this connection, Borrower agrees to and shall
indemnify Lender from any liability, claim, or loss, together with attorneys'
fees and costs, resulting from the disbursement of Loan proceeds or from the
condition of the Financed Improvements, whether related to the quality of
construction or otherwise, and whether arising during or after the term of the
Loan. This provision shall survive the repayment of the Loan and continue in
full force and effect so long as the possibility of such liability or claim
exists.
11.8 Amendment. This Agreement (including all exhibits and schedules
hereto) may not be amended or modified, and no term, provision, or condition
hereof may be waived, except by a written instrument that is signed by all of
the parties hereto.
11.9 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signature thereto and hereto were on the same instrument. This
Agreement shall become effective upon Lender's receipt of one (1) or more
counterparts hereof signed by Borrower and Lender.
11.10 Lender Not a Fiduciary. The relationship between Borrower and
Lender is solely that of debtor and creditor, and Lender has no fiduciary or
other special relationship with Borrower, and no term or provision of any of the
Loan Documents shall be construed so as to deem the relationship between
Borrower and Lender to be other than that of debtor and creditor.
11.11 Release and Return of Notes Receivable. Subject to the rights of
the participant lenders, in the event that all Obligations hereunder are fully
satisfied, then within a reasonable time thereafter not to exceed thirty (30)
days, Lender shall endorse the Pledged Notes Receivable, if appropriate, and
deliver to Borrower such Pledged Notes Receivable, together with any other
nonrecourse Collateral reassignment documents requested and prepared by
Borrower, at Borrower's sole cost and expense, free and clear of any Liens or
encumbrances by any Person claiming by, through, or under Lender.
11.12 Accounting Principles. Where the character or amount of any asset
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be determined or made in accordance
with GAAP consistently applied at the time in effect, to the extent applicable,
except where such principles are inconsistent with the requirements of this
Agreement.
11.13 Entire Agreement. This Agreement, the other Loan Documents and the
Commitment, including the exhibits and schedules to them, comprise the entire
agreement between the parties relating to the subject matter hereof and
supersede all prior agreements and understandings, both oral and written,
between the parties hereto relating to the subject matter hereof (including but
not limited to the Commitment, except as otherwise expressly provided herein),
may not be changed or terminated orally or by
<PAGE>
course of conduct, and shall be deemed effective as of the Closing Date. The
Commitment shall survive the Closing and in the event of a conflict between the
Commitment on the one hand, and this Agreement and the Loan Documents on the
other hand, the provisions of the Agreement and the Loan Documents shall be
controlling.
11.14 Litigation. TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND OR CLARIFY ANY RIGHT, POWER, REMEDY,
OR DEFENSE ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN, WHETHER SOUNDING
IN TORT OR CONTRACT OR OTHERWISE, OR WITH RESPECT TO ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY
PARTY; AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE
A JUDGE AND NOT BEFORE A JURY. EACH OF BORROWER AND LENDER FURTHER WAIVES ANY
RIGHT TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN WHICH A JURY TRIAL HAS BEEN
WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN
WAIVED. FURTHER, BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
LENDER, INCLUDING LENDER'S COUNSEL, HAS REPRESENTED TO BORROWER, EXPRESSLY OR
OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. BORROWER ACKNOWLEDGES THAT
THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT TO LENDER'S ACCEPTANCE
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
The waiver and stipulations of Borrower and Lender in this Section 11.13
shall survive the final payment or performance of all of the Obligations and the
resulting termination of this Agreement.
11.15 Incorporation of Exhibits and Schedules. This Agreement, together
with all exhibits and schedules hereto and other documents incorporated herein
by reference, constitute one (1) document and agreement that is referred to
herein by the use of the defined term "Agreement." Such exhibits and schedules
are incorporated herein as though fully set out in this Agreement. The
definitions contained in any part of this Agreement shall apply to all parts of
this Agreement.
11.16 Consent to Advertising and Publicity of Applicable Timeshare
Documents. Borrower hereby consents that Lender may issue and disseminate to the
public information describing the credit accommodation entered into pursuant to
this Agreement, consisting of the name and address of Borrower, the Loan's
amount, and the Collateral therefor.
11.17 Directly or Indirectly. Where any provision in the Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provisions shall be applicable, whether such action is taken
directly or indirectly by such Person.
<PAGE>
11.18 Captions. Section captions have been included in this Agreement for
convenience of reference only and should not be relied upon or used in
interpreting the meaning or intent of any provision hereof.
11.19 Gender. Words of any gender in this Agreement shall include each
other gender, where appropriate.
11.20 No Duty. All attorneys, accountants, appraisers, consultants,
custodians, and other professionals retained by Lender in connection with the
Loan shall have the right to act exclusively in the interest of Lender and shall
have no duty of disclosure, duty of loyalty, duty of care, or other duty or
obligation of any kind or nature whatsoever to Borrower or any other Person.
11.21 Reimbursement for Taxes. Borrower will promptly, upon written
demand from Lender, reimburse Lender for any taxes assessed against Lender by
the State of New York or any subdivision thereof that is on account of or
measured by the interest income received by Lender under the Pledged Notes
Receivable and the Applicable Mortgages assigned to Lender pursuant to this
Agreement or in any way imposed upon Lender in connection with the transactions
contemplated hereunder, including, without limitation, any general intangible
tax or documentary tax, excluding all franchise taxes, taxes on capital and net
worth, gross receipts taxes, and taxes imposed on gross or net income.
11.22 Submissions.
(a) All documents, agreements, reports, surveys, appraisals,
insurance policies, references, financial information, and other submissions
required to be furnished by Borrower to Lender hereunder or pursuant to any of
the other Loan Documents (collectively "Submissions") shall be in form and
content satisfactory to Lender, in its sole discretion, and prepared at
Borrower's or an Applicable Underlying Borrower's expense.
(b) Lender shall have the prior right of approval of any Person
responsible for preparing a Submission (a "Preparer") and may reject any
Submission if Lender, in its sole discretion, believes that the experience,
skill, or reputation of the applicable Preparer is unsatisfactory in any respect
whatsoever.
(c) All reports and appraisals required to be furnished by
Borrower to Lender hereunder or pursuant to any of the other Loan Documents
shall specifically be addressed to Lender and include the following statement:
THE UNDERSIGNED ACKNOWLEDGES THAT CREDIT SUISSE FIRST
BOSTON MORTGAGE CAPITAL LLC IS RELYING ON THE WITHIN
INFORMATION IN CONNECTION WITH ITS ADVANCE TO BORROWER
ON THE SUBJECT PROPERTY.
(d) Whether or not expressly stated herein, all consents and
approvals granted by Lender hereunder shall be valid and effective only if
contained in a written
<PAGE>
document or instrument that has been signed by a duly authorized representative
of Lender.
11.23 Confidentiality. Each party hereto acknowledges and agrees that the
material terms hereof and of the other Loan Documents are and shall remain
strictly confidential. No party hereto shall ever disclose the material terms
and provisions hereof without the express prior written consent of the other
parties; provided, however, that the disclosure of the material terms and
provisions of this Agreement to a party's shareholders, officers, directors,
principals, attorneys, accountants, or lenders, or if required by law or
subpoena, shall not constitute a breach of this Section 11.22. The parties
hereto shall take all appropriate measures to prevent the inadvertent or
unintentional disclosure of the material terms and provisions hereof.
11.24 Borrower Acknowledgment. Borrower acknowledges and agrees that
although Borrower and Lender (or its Affiliates) have discussed and are engaged
in other transactions and relationships between them, including, without
limitation, a public offering of stock of Equivest and the rendering of a
fairness opinion, Lender is under no obligation to enter into any other
agreement or perform any other services for Borrower except as expressly set
forth in this Agreement. Any other transaction or relationship between Borrower
and Lender (or Lender's Affiliates) shall be evidenced by other documentation,
shall be separate and independent from the Loan and shall have no effect on
Borrower's obligations to Lender with respect to the Loan or Lender's remedies
under the Loan Documents. Borrower acknowledges and agrees that no discussions
or oral agreements heretofore or hereafter occurring between Borrower and Lender
(or its Affiliates) shall have any effect unless embodied in a written agreement
executed by all parties. Further no other written agreement between the parties
and their affiliates and the performance of the parties thereunder shall have
any effect whatsoever on the Borrower's obligations or Lender's remedies under
this Agreement and the Loan Documents. All requests for information, business
plans and correspondence relating to the Loan shall be forwarded to David Arzi
and Michael Szwajkowski, Credit Suisse First Boston Mortgage Capital LLC, 11
Madison Avenue, New York, New York 10010.
------------ ------------- -------------
Initial Initial Initial
11.25 Loans to Eastern Resorts Company, LLC. On or prior to the Closing
Date, the loans from Resort Funding to Eastern Resorts Company, LLC shall be
removed from the existing credit facilities between Lender and Resort Funding
and Lender shall be paid all funds previously advanced to Resort Funding in
respect thereof, together with any accrued but unpaid interest thereon.
11.26 Consent by Lender. For purposes of Section 6.3(b) of the Loan and
Security Agreement between Lender and Resort Funding dated November 14, 1997 and
Section 6.2(b) of the Loan and Security Agreement between Lender and Resort
Funding dated February 11, 1998, Lender hereby consents to the Transaction and
the Loan.
<PAGE>
11.27 Final Agreement. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AS TO THE MATTERS CONTAINED HEREIN, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS.
IN WITNESS WHEREOF, Borrower and Lender, have caused this Agreement to be
duly executed and delivered effective as of the date first above written.
BORROWER:
RESORT FUNDING, INC., a Delaware
WITNESS: corporation
By: /s/ Eric C. Cotton
-----------------------------------
Name: Eric C. Cotton
Title: Secretary
EQUIVEST FINANCE, INC., a Florida
corporation
By: /s/ Richard C. Breeden
-----------------------------------
Name: Richard C. Breeden
Title: Chairman and CEO
EASTERN RESORTS COMPANY, LLC,
a Rhode Island limited liability company
By: EASTERN RESORTS
CORPORATION, a Delaware
corporation, its managing member
By: /s/ R. Perry Harris
-----------------------------------
Name: R. Perry Harris
Title: President
<PAGE>
EASTERN RESORTS CORPORATION, a
Delaware corporation, formerly
known as ERC ACQUISITION CORP.,
a Delaware corporation
By: /s/ R. Perry Harris
-----------------------------------
Name: R. Perry Harris
Title: President
LENDER:
CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL, LLC, a Delaware
limited liability company
By: /s/ Michael C. Szwajkowski
-----------------------------------
Name: Michael C. Szwajkowski
Title: Vice President
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER HAS RECEIVED AN
OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER, THAT SUCH OFFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS
OTHERWISE IN COMPLIANCE WITH THE SECURITIES ACT AND SUCH LAWS. THE SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO CERTAIN RIGHTS AND
OBLIGATIONS AS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT, DATED AS OF JULY
17, 1998, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE COMPANY.
WARRANT
To Purchase Common Stock of
EQUIVEST FINANCE, INC.
THIS IS TO CERTIFY THAT CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
(the "Initial Holder") a Delaware limited liability company, or its registered
assigns, is entitled, at any time prior to the Expiration Date (as hereinafter
defined), to purchase from EQUIVEST FINANCE, INC., a Florida corporation (the
"Company"), one hundred eighty thousand (180,000) shares of Common Stock (as
hereinafter defined and subject to adjustment as provided herein), in whole or
in part, at a purchase price, subject to adjustment, as provided herein, of
$8.00 per share, all on the terms and conditions and pursuant to the provisions
hereinafter set forth.
Definitions. As used in this Agreement, the following terms
have the respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Initial Date, other than any
Warrant Stock.
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which banking institutions in the State of New York are
authorized or required by law or executive order to close or a day which is
declared a national holiday.
"Close of Business" shall have the meaning set forth in
Section 2(a).
"Commission" shall mean the Securities and Exchange Commission
as from time to time constituted, created under the Exchange Act, or if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it, then the body performing such duties
on such date.
"Common Stock" shall mean the class of stock which, at the
date of this instrument, is designated as common stock, $.05 par value, of the
Company and the class or classes of stock, if any, into which such common stock
may thereafter be changed or reclassified.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, as in effect
from time to time.
"Excluded Shares" means (without duplication) (i) all shares
of Common Stock issued in an Offering, and (ii) those shares of Common Stock
issued or issuable as described in Schedule A attached hereto and incorporated
herein.
"Exercise Price" shall have the meaning set forth in Section
2(b) hereof.
"Expiration Date" shall have the meaning set forth in Section
2(a) hereof.
"Fair Market Value" of a share of Common Stock shall mean, as
of any specific date of determination (the "Determination Date") the price per
share of such Common Stock equal to the average of the last sale price of such
Common Stock on each of the ten trading days (or such lesser number of days as
shares shall have been listed or traded) prior to the Determination Date on the
principal exchange on which the Common Stock may at the time be listed; or, if
there shall have been no sales on such exchange on any such trading day, the
average of the closing bid and asked prices on such exchange on such trading
day; or, if there is no such bid and asked price on any such trading day, on the
next preceding date when such bid and asked price occurred; or, if the Common
Stock shall not be so listed, the average of the closing sales prices as
reported by NASDAQ, the American Stock Exchange, the New York Stock Exchange or
whichever exchange on which Company's Common Stock is listed, at the end of each
of the ten trading days prior to the Determination Date; provided that if one
class of the Common Stock is listed or reported as described in this sentence
but the class of Common Stock with respect to which Fair Market Value is being
measured is not so listed or reported, then the Fair Market Value per share with
respect to such unlisted and unreported class shall be identical to such listed
or reported class; and provided further that if Common Stock is not publicly
traded and listed on a national stock exchange or on NASDAQ on the Determination
Date, the Fair Market Value shall be an amount as reasonably determined in good
faith by the Company's Board of Directors upon a review of the relevant factors
and reflecting the unique characteristics of the Company and supported by a
written opinion of an investment banking firm that is nationally recognized in
the United States, it being the intention of the parties that the value of a
share of Common Stock shall constitute a pro rata portion of the Company's
equity on a fully diluted basis, valuing the Company as a going concern and
without discount in respect of a minority interest.
"Holder" shall mean the Initial Holder and any Person or
Persons to whom this Warrant is transferred pursuant to Section 5 hereof
including those Person or Persons in whose name or names the Warrant is
registered from time to time on the Warrant Register.
"Initial Date" shall mean July 17, 1998.
"Initial Holder" shall mean Credit Suisse First Boston
Mortgage LLC.
"Offering" shall mean an offering of newly issued shares of
any class of Common Stock (whether alone or in conjunction with any secondary
public offering) placed or underwritten by an investment banking firm that is
nationally recognized in the United States which produces net cash proceeds for
the Company or its affiliates (as defined in Rule 12b-2 of the Exchange Act of
1934, as amended) of at least $35,000,000 and immediately after which the Common
Stock is listed or admitted for trading on the NASDAQ Small Cap or National
Market, the American Stock Exchange or the New York Stock Exchange.
"Office of the Company" shall mean the principal executive
offices of the Company as notified from time to time pursuant to Section 14 or
the office or agency of the Company designated pursuant to Section 12.
<PAGE>
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any wholly-owned subsidiary thereof.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Initial Date, by and among the Company and the Initial
Holder, a copy of which is on file at the Office of the Company.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, as in
effect from time to time.
"Stock Register" shall mean the register maintained by the
Company to record ownership and transfer of Common Stock.
"Warrant" or "Warrants" shall mean this Warrant and all
warrants issued upon transfer, division or combination of, or in substitution
for, thereof.
"Warrant Register" shall mean the register maintained by the
Company to record ownership and transfers of this Warrant pursuant to the terms
hereof.
"Warrant Stock" shall mean the shares of Common Stock
purchased upon exercise of this Warrant.
Duration and Exercise of Warrant.
Duration. The Warrant shall expire on July 18, 2003
(the "Expiration Date"). The Warrant may be exercised at any time on or prior to
the last Business Day prior to the Expiration Date; provided, however, that if
exercised on such last Business Day, such exercise must occur before 5:00 p.m.
Eastern Standard Time (the "Close Of Business") on such Day. Thereafter, the
Warrant will become wholly void and of no value.
Exercise. Subject to the provisions of this
Agreement, the Holder of this Warrant shall have the right to purchase from the
Company (and the Company shall issue and sell to such Holder) the aggregate
number of fully paid and nonassessable shares of Common Stock of the Company set
forth on the first page hereof (or such additional number of shares as may be
further provided in this Agreement) at the purchase price per share set forth on
the first page hereof, as adjusted from time to time as provided in this
Agreement provided that no such adjustment shall cause such purchase price per
share to be less than par value (such price, as so adjusted being referred to
herein as the "Exercise Price"). The Exercise Price shall be payable (i) in cash
or by bank cashier's check in United States funds payable to the order of the
Company or (ii) if the Common Stock is listed on a securities exchange or
interdealer quotation system, in the manner set forth in Section 2(c) hereof if
requested by the Holder in the notice of exercise hereafter described. The
Warrant shall be exercisable by (i) delivering to the Company the form of notice
of exercise attached hereto as Exhibit A duly completed and signed by the Holder
or by the duly appointed legal representative or duly authorized attorney
thereof, and (ii) within five Business Days thereafter, depositing with the
Company the certificate evidencing the Warrant and paying the aggregate Exercise
Price for the number of shares of Common Stock in respect of which the Warrant
is being exercised; provided, that the Exercise Price must in any event be paid
and the certificate representing the Warrant deposited with the Company prior to
the Close of Business on the fifth Business Day following delivery of such
notice. Upon each partial exercise of the Warrant, a new Warrant evidencing the
balance of the shares of Common Stock issuable hereunder will be issued to the
Holder, as soon as reasonably practicable, on the same terms as the Warrant
partially exercised.
<PAGE>
Cashless Exercise. In lieu of any cash payment
required upon exercise of the Warrant, the Holder may elect to exercise this
Warrant in full or in part by surrendering this Warrant in the manner specified
in Section 2(b) hereof in exchange for the number of shares of Common Stock
equal to the product of (i) the number of shares of Common Stock as to which the
Warrant is being exercised multiplied by (ii) a fraction, (y) the numerator of
which is the Fair Market Value of a share of Common Stock on the date of
exercise less the Exercise Price, and (z) the denominator of which is the Fair
Market Value of a share of Common Stock on such date of exercise.
Payment of Taxes and Expenses. The Company shall pay all
expenses in connection with, and all taxes and other governmental charges that
may be imposed with respect to, the issuance or delivery of this Warrant and the
Warrant Stock, unless any such tax or charge is imposed by law upon the Holder,
in which case such tax or charge shall be paid by the Holder. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issuance of any certificate for shares of
Common Stock in any name other than that of the Holder, and in such case the
Company shall not be required to issue or deliver any stock certificate until
such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
Fractional Shares. The Company shall not be required to issue
a fractional share of Common Stock upon exercise of the Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon any exercise of the Warrant, the Company shall pay a cash adjustment in
respect of such fraction in any amount equal to the same fraction of the Fair
Market Value of the Common Stock on the date of exercise, less the portion of
the Exercise Price attributable to such fraction.
Transfer, Division and Combination.
Transfer. Subject to compliance with the provisions
of Section 10, transfers of this Warrant, in whole or in part, shall be recorded
on the Warrant Register upon surrender of the Warrant at the Office of the
Company, together with (i) a written assignment substantially in the form of
Exhibit B hereto, duly completed and signed by the Holder or by the duly
appointed legal representative or duly authorized attorney thereof and (ii)
funds sufficient to pay any applicable transfer taxes or evidence that any such
transfer taxes have been paid or that no such transfer taxes are due. Upon such
surrender and, if required, such payment, the Company shall, subject to
compliance with Section 10, execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination or denominations
specified in the instrument or assignment, and shall issue to the assignor a new
Warrant evidencing any portion of this Warrant not so assigned, and this Warrant
certificate shall promptly be canceled. A Warrant, if properly assigned in its
entirety in compliance with Section 10, may be exercised by the new Holder
without the issuance of a new Warrant certificate.
Division and Combination. Subject to compliance with
Section 10, this Warrant may be divided or combined with other Warrants upon
presentation thereof at the Office of the Company, together with a written
notice specifying the name or names and denomination or denominations in which a
new Warrant or new Warrants are to be issued, signed by the Holder or by the
duly appointed legal representative or duly authorized attorney thereof. Subject
to compliance with Section 10 as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
Maintenance of Warrant Register. The Company agrees
to maintain the Warrant Register at all times prior to the Expiration Date at
the Office of the Company, and to cause the Warrant Register to be available for
inspection during normal working hours by any Holder or its representatives or
any prospective purchaser of a Warrant designated by a Holder or its
representatives.
<PAGE>
Adjustments.
Adjustment. The number of shares of Common Stock for
which this Warrant is exercisable and the Exercise Price at which such shares
may be purchased shall be subject to adjustment from time to time as set forth
in this Section 6.
Stock Dividends, Subdivisions and Combinations. If at
any time the Company shall:
declare, order, pay or make a dividend on
Common Stock payable in Additional Shares of Common Stock;
subdivide its outstanding shares of
Common Stock into a larger number of shares of Common Stock; or
combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock;
then (A) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the happening of such event shall be adjusted to
equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock immediately prior to the happening of such
event would own or be entitled to receive after the happening of such event, and
(B) the Exercise Price shall be adjusted to equal (1) the Exercise Price in
effect immediately prior to such event multiplied by the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (2) the number of shares for which this Warrant is
exercisable immediately after such adjustment.
Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding shares of Common Stock evidence of
indebtedness of the Company, cash (including cash dividends payable out of
consolidated earnings or earned surplus) or assets or securities other than
Additional Shares of Common Stock, including stock of a subsidiary but excluding
dividends or distributions referred to in Section 6(b) above (any such evidences
of indebtedness, cash, assets or securities, the "assets or securities"), then,
in each case, the number of shares of Common Stock issuable after such record
date to Holder upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock issuable upon the exercise of
such Warrant immediately prior to such record date by a fraction, the numerator
of which shall be the Fair Market Value per share of Common Stock immediately
prior to the record date for such distribution and the denominator of which
shall be the Fair Market Value per share of Common Stock immediately prior to
the record date for such distribution less the then fair value (as determined in
good faith by the Board) of the evidences of its indebtedness, cash or assets or
other distributions so distributed attributable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to the record date for
the determination of shareholders entitled to receive such distribution. Any
adjustment required by this Section 6(c) shall be made whenever any such
distribution is made, and shall become effective on the date of such
distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution.
Reorganization, Reclassification, Consolidation or
Merger. If the Company shall (i) effect any reorganization or reclassification
of its capital stock or (ii) consolidate or merge with or into, or transfer all
or substantially all of its properties and assets to, any other person, in
either case in a transaction in connection with which a Holder has not exercised
this Warrant, then, upon any exercise of this Warrant subsequent to the
consummation thereof, such Holder shall be entitled to receive, in lieu of the
Common Stock issuable upon exercise immediately prior to such consummation, the
highest amount of stock, other securities or property (including cash) to which
such Holder would have been entitled upon such consummation if such Holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustments thereafter as provided in this Section 6.
<PAGE>
Antidilution Adjustments.
Certain Definitions. As used in this subsection
6(e), the following terms shall have the following respective meanings:
"Base Price" means the Fair Market Value
per share of Common Stock, as determined from time to time as provided in this
Warrant.
"Options" means rights, options or
warrants to subscribe for, purchase or otherwise acquire either shares of Common
Stock or Convertible Securities.
"Convertible Securities" means any
evidence of indebtedness, shares of stock or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
"Issue" or "Issued" means, with respect
to any security (including Options), the grant, issue or sale thereof, as the
case may be.
"Additional Shares of Common Stock"
means, for purposes of adjusting the Base Price pursuant to subsection (e)(iii)
of this Section 6, all shares of Common Stock issued (or, pursuant to subsection
(e)(ii) of this Section 6 deemed to be issued) by the Company after the Initial
Date (exclusive of shares issued upon exercise or conversion of any Options or
Convertible Securities granted or issued prior to the Initial Date) without
consideration or for a consideration (determined pursuant to subsection (e)(iv)
of this Section 6) per share less than the Base Price in effect on the date
immediately prior to such issue, other than Excluded Shares.
Issue of Securities Deemed to be Issue of
Additional Shares of Common Stock. In the case the Company at any time, or from
time to time after the Initial Date, shall Issue any Options or Convertible
Securities, or shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or Convertible
Securities, then the maximum number of shares (as set forth in the instrument
relating thereto without regard to the provisions contained therein for a
subsequent adjustment of such number) of Common Stock issuable upon the exercise
of such Options, or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such Issue or, in
case such a record date shall have been fixed, as of the close of business on
such record date; provided, however, that Additional Shares of Common Stock
shall not be deemed to have been Issued unless the consideration per share
(determined pursuant to subsection (e)(iv) of this Section 6) of such Additional
Shares of Common Stock is less than the Base Price in effect immediately prior
to such Issue, or such record date, as the case may be. In any case:
no further adjustment of the number of
Additional Shares of Common Stock shall be made upon the subsequent Issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible Securities;
if Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company, or any increase or
decrease in the number of shares of Common Stock issuable upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the number of
shares issuable upon exercise of this Warrant shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options, or the rights of conversion or exchange
under such Convertible Securities, which are outstanding at such time; and
<PAGE>
upon the expiration of any such Options
or any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the number of shares issuable upon exercise of
this Warrant computed upon the original issue thereof (or upon the occurrence of
a record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if:
in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Company for the issue of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, or for the
issue of all such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually received by the
Company upon such conversion or exchange, and
in the case of Options for Convertible
Securities, the only Convertible Securities issued were Convertible Securities,
if any, actually issued upon the exercise of such Options, and the consideration
received by the Company for the Additional Shares of Common Stock deemed to have
been issued was the consideration actually received by the Company for the issue
of all such Options, whether or not exercised, plus the consideration actually
received by the Company upon the issue of the Convertible Securities with
respect to which such Options were actually exercised.
Adjustments to Base Price. In the event the
Company shall issue Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to subsection (e)(ii) of
this Section 6) without consideration or for a consideration per share less than
the Base Price in effect immediately prior to the issuance of such Additional
Shares of Common Stock, then and in each such case, the Base Price in effect on
the date of and immediately prior to such issuance shall be adjusted,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Base Price by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of Additional Shares
of Common Stock so issued would purchase at such Base Price, including for such
purposes the consideration paid and payable for Additional Shares of Common
Stock deemed issued pursuant to subsection (e)(ii) of the Section 6, in
accordance with subsection (e)(iv) of this Section 6, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of such Additional Shares of Common Stock so
issued and deemed issued under subsection (e)(ii) of this Section 6. The Base
Price, as adjusted from time to time, shall be used to calculate in accordance
with Section 6(e)(vi) below the additional number of shares of Common Stock the
Holder is entitled to purchase upon exercise of this Warrant.
Computation of Consideration. For purposes of this
subsection 6(e), the consideration received by the Company for the Issue of any
Additional Shares of Common Stock shall be computed as follows:
Nature of Consideration. Such consideration shall,
insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Company, excluding
amounts paid or payable for accrued interest or accrued dividends;
insofar as it consists of marketable
"securities", be computed at the fair market value thereof at the time of issue
as determined in the manner provided for the Common Stock in the definition of
"Fair Market Value;"
<PAGE>
insofar as it consists of property other
than cash or marketable securities, be computed at the fair market value thereof
at the time of such Issue, as determined in good faith by the Company's Board of
Directors;
in the event Additional Shares of Common
Stock are issued together with other stock or securities or other assets of the
Company for consideration so received, computed as provided in clauses (1) and
(2) above, as determined in good faith by the Company's Board of Directors; and
in the event that the consideration
received by the Company for the issue of any additional shares of common stock
exceeds ten million dollars ($10,000,000) in any single transaction, then the
Board of Directors shall obtain a written opinion of an investment banking firm
that is nationally recognized in the United States to support the determination
of the Board of Director under subsections 6(e)(iv)(3) and (4).
Options and Convertible Securities. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been Issued pursuant to subsection (e)(ii)(A) of this
Section 6, relating to Options and Convertible Securities, shall be determined
by dividing:
Options and Convertible Securities.
the amount, if any, received or
receivable by the Company as consideration for the Issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities or, in the case of Options
for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
Splits, Subdivisions or Combinations of Shares and
Stock Dividends. If the Company at any time while this Warrant remains
outstanding and unexpired shall split, subdivide, combine its Common Stock or
declare a stock dividend, the Base Price shall be proportionately decreased in
the case of a split or subdivision or share dividend, or proportionately
increased in the case of a combination. Any adjustment under this subsection
shall become effective when the split, subdivision or combination becomes
effective and notwithstanding this subsection 6(e)(v), in no event shall the
purchase price for the Warrant Stock exceed $8.00 per share.
Number of Additional Shares Issuable Upon Exercise
of this Warrant. Upon such adjustment of the Base Price resulting from the
provisions of subsection (e)(iii) of this Section 6, the number of shares of
Common Stock issuable upon exercise of this Warrant shall be increased by an
amount determined by multiplying the number of shares of Common Stock which the
Holder was entitled to purchase pursuant to this Warrant immediately prior to
such adjustment (all as adjusted for stock splits subdivisions, combinations and
stock dividends) by a fraction, (i) the numerator of which shall be the Base
Price in effect immediately prior to such adjustment of the Base Price, and (ii)
the denominator of which shall be the newly adjusted Base Price calculated
pursuant to subsection (e)(iii) of Section 6.
<PAGE>
Notices.
Notice of Adjustment. Whenever the number of shares
of Common Stock for which this Warrant is exercisable shall be adjusted pursuant
to Section 6, the Company shall forthwith prepare a certificate to be executed
by the chief financial officer of the Company setting forth, in reasonable
detail, the event requiring the adjustment, the method by which the adjustment
was calculated and describing the number of shares of Common Stock for which
this Warrant is exercisable after giving effect to such adjustment or change.
The Company shall promptly cause a signed copy of such certificate to be
delivered to each Holder. The Company shall keep at the Office of the Company
copies of all such certificates and cause the same to be available for
inspection during normal business hours by any Holder or any prospective
purchaser or a Warrant designated by a Holder.
Notice of Extraordinary Distributions. In the event
that the Company proposes to set a record date for the purpose of entitling
holders of its Common Stock to receive any dividend or other distribution (other
than dividends or distributions listed on Schedule A hereto) of:
cash in an amount in excess of the
previous regular cash dividend; or
any evidences of its indebtedness, any
shares of its stock or any other securities or property of any nature
whatsoever, including any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares or its stock of any other
securities or property;
then the Company shall deliver to each Holder written notice of such proposed
dividend or distribution at least 30 days prior to such proposed record date. A
reclassification of Common Stock (other than a change in par value, or from par
value to no par value or from no par value to par value) into shares of Common
Stock and shares of any other class of stock shall be deemed a distribution by
the Company to the holders of its Common Stock of such shares of such other
class of stock within the meaning of this Section 7(b) and, if the outstanding
shares of Common Stock shall be changed into a larger or smaller number of
shares of Common Stock as a part of such reclassification, shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of Section 6(b).
Notice of Certain Mergers and Asset Dispositions. In
the event that the Company proposes to consolidate with or merge into another
corporation in a transaction in which the Common Stock will be changed or
converted into other securities, cash or property, or to sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business to another corporation or other entity, the Company shall deliver to
each Holder written notice of such proposed transaction at least 15 days prior
to the earlier of its consummation or the taking of any record of the holders of
its Common Stock for the purpose of determining their rights pursuant to such
transactions.
Notice of Registration Statement. In the event that
the Company shall propose to file a registration statement under the Securities
Act after the Initial Date with respect to any shares of Common Stock of the
Company, it shall deliver to each Holder (i) at least 15 days' advance notice of
its intention to file such registration statement and the anticipated range of
prices at which the shares of Common Stock are proposed to be offered; (ii)
prompt notice of any change in such anticipated range of prices; and (iii)
notice by 10:00 a.m., New York City time, on the day prior to the date on which
the registration statement is expected to become effective.
Financial Statements of the Company. The Company
shall promptly deliver to the Holders any annual, quarterly or other financial
statements that are provided to any holders of equity or debt (other than bank
debt) securities of the Company in their capacity as holders of such securities.
Put Right. If the Company has not consummated an
Offering prior to three (3) years from the Initial Date, this Warrant shall, for
a period of two (2) years thereafter (the "Put Period"), be immediately entitled
to the rights in this Section 8. The Company hereby grants to the Holder the
option (the "Put Option"), at any time during
<PAGE>
Put Period, to require the Company to purchase this Warrant, in whole but not in
part, at a price (the "Put Price") equal to the Fair Market Value of the shares
of Common Stock which would be issued if this Warrant were exercised as of the
date the Put Option is exercised minus the Exercise Price for such shares.
Further, solely for purposes of this Section 8, if the Fair Market Value of
shares of Common Stock are determined in accordance with subparagraph (iii)
under the definition of "Fair Market Value" in Section 1 hereof, such
determination shall reflect the value of the Common Stock as if the Common Stock
were fully distributable and freely tradeable in a liquid public market as well
as external market conditions. The Put Option shall be exercised by the Holder
by giving written notice to the Company in the form attached hereto as Exhibit
C. Payment of the Put Price, against delivery of this Warrant duly endorsed by
the Holder, shall be by means of a cash payment and shall take place not later
than 120 days after the date such notice is given by the Holder, or if the Put
Price shall not have been determined by such 120th day, within 10 days after
such determination.
Reservation and Authorization of Common Stock.
The Company shall at all times reserve and keep
available for issuance upon the exercise of the Warrant the maximum number of
its authorized but unissued shares of Common Stock as could then potentially be
required to permit the exercise in full of all outstanding Warrants. All shares
of Common Stock issuable upon exercise of any Warrant and payment therefor in
accordance with the terms of such Warrant shall be duly and validly issued and
fully paid and nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an
adjustment reducing the Exercise Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Exercise Price.
Legends.
Warrant Restrictive Legend. Except as otherwise
provided in this Section 10, each Warrant shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR UNLESS THE ISSUER HAS RECEIVED AN
OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER, THAT SUCH OFFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER
DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT AND SUCH LAWS. THE SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO CERTAIN RIGHTS
AND OBLIGATIONS AS SET FORTH IN A REGISTRATION RIGHTS
AGREEMENT, DATED AS OF JULY 17, 1998, A COPY OF WHICH IS ON
FILE AT THE OFFICE OF THE COMPANY.
<PAGE>
Warrant Stock Restrictive Legend. Except as otherwise
provided in this Section 10, each certificate for Warrant Stock initially issued
upon the exercise of this Warrant, and each certificate for Warrant Stock issued
to any subsequent transferee of any such certificate, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT"), AND MAY
NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL TO THE HOLDER OF
THESE SHARES IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, THAT SUCH OFFER,
SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT
FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS. THE
SHARES ARE SUBJECT TO THE CONDITIONS SPECIFIED IN A CERTAIN WARRANT, DATED JULY
17, 1998. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE,
AGREES TO BE BOUND BY THE PROVISIONS OF SUCH WARRANT. THE SHARES ARE SUBJECT TO
CERTAIN RIGHTS AND OBLIGATIONS AS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT,
DATED AS OF JULY 17, 1998, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE
COMPANY.
Termination of Restrictions. The legend requirements
of Sections 10(a) and 10(b) shall terminate when (i) the Registration Rights
Agreement has terminated and is no longer of any force and effect and (ii)
either (y) the security in question shall have been effectively registered under
the Securities Act and disposed of pursuant thereto or (z) the Company shall
have received an opinion of counsel reasonably satisfactory to it that such
legend is not required in order to insure compliance with the Securities Act.
Loss or Mutilation. Upon receipt by the Company from any
Holder of evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of this Warrant and an indemnity
reasonably satisfactory to it (and in case of mutilation upon surrender and
cancellation hereof), the Company will execute and deliver in lieu thereof a new
Warrant of like tenor to such Holder; provided, in the case of mutilation, no
indemnity shall be required if this Warrant in identifiable form is surrendered
to the Company for cancellation.
Office of the Company. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant, and where the Warrant Register shall be maintained.
No Rights or Liabilities as Stockholder. Nothing contained in
this Warrant shall be construed as conferring upon any Holder any rights as a
stockholder of the Company or as imposing any liabilities on such Holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or stockholders of the
Company or otherwise.
Notice. All notices, requests, demands, letters, waivers and
other communications required or permitted to be given here under shall be in
writing and shall be deemed to have been duly given if (a) delivered personally,
(b) mailed, certified or registered mail with postage prepaid, (c) sent by
next-day or overnight mail or delivery or (d) sent by telecopy or telegram, as
follows:
(i) If to the Initial Holder:
Credit Suisse First Boston
Mortgage Capital LLC
11 Madison Avenue
New York, New York 10010-3629
Attn: David Arzi, Director
<PAGE>
(ii) If to any other Holder, at its last known address
appearing on the Warrant Register
(iii) If to the Company:
Equivest Finance, Inc.
Two Clinton Square
Syracuse, New York 13202
Attn: Eric C. Colton, Esq.
General Counsel
All such notices, requests, demands, letters, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, x) if by certified or registered mail, on the fifth
business day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered or (z) if by telecopy or telegram, on the next
day following the day on which such telecopy or telegram was sent, provided that
a copy is also sent by certified or registered mail.
Successors and Assigns. This Warrant and the rights evidenced
hereby shall be binding upon and shall inure to the benefit of the successors of
the Company and the successors and assigns of the Holder. In addition, and
provided that an express assignment shall have been made, a copy of which shall
have been delivered to the Company, the provisions of this Warrant shall be for
the benefit of and enforceable by all Holders from time to time of this Warrant
and shall be enforceable by any Holder.
Amendment. This Warrant may be amended, modified or
supplemented or the provisions hereof waived only with the written consent of
the Company and the Holder.
Headings. The headings and captions contained in this Warrant
are for convenience of reference only and shall not control or affect the
meaning or construction of any provision hereof.
GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and attested by its Secretary.
Dated: July 17, 1998
ATTEST: EQUIVEST FINANCE, INC.
By: /s/ Eric C. Cotton By: /s/ Richard C. Breeden
--------------------- ------------------------------
Name: Eric C. Cotton Name: Richard C. Breeden
Title: Secretary Title: Chairman and CEO
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
[To be executed only upon exercise of the Warrant]
The undersigned registered owner of Warrant No. __ dated ________, to
purchase Common Stock of Equivest Finance, Inc. (the "Company"), irrevocably
exercises such Warrant for the purchase of shares of Common Stock of the
Company, and hereby undertakes to make payment therefor and to deposit with the
Company the certificate representing such Warrant, in each case as set forth in
Section 2(b) thereof and at the price and on the other terms and conditions
specified therein. The undersigned requests that certificates for the shares of
Common Stock to be purchased pursuant hereto be issued in the name of and
delivered to____________ whose address is _____________________________________
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in such Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable thereunder
be delivered to the undersigned.
If the Company's Common Stock is listed on a securities exchange or
interdealer quotation system, the undersigned [select one: (does) (does not)]
choose to pay the Exercise Price pursuant to a cashless exercise of the Warrant
pursuant to Section 2(c) of the Warrant.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this notice of exercise must correspond with the name
as written upon the face of the Warrant in every particular, without alteration
or enlargement of any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT
[To be executed only upon transfer of the Warrant, in whole or in part, in
accordance with its terms]
FOR VALUE RECEIVED, the undersigned registered owner ("Assignor") of Warrant No.
__ to purchase Common Stock of Equivest Finance, Inc. (the "Company") hereby
sells, assigns and transfers unto
-----------------------
("Assignee")
-----------------------
(Name)
-----------------------
(Street Address)
-----------------------
(City, State, Zip Code)
the right to purchase __________ shares of Common Stock of the Company,
evidenced by such Warrant, together with all right, title and interest therein,
and does irrevocably constitute and appoint _____________________________
attorney to transfer the said right on the books of said corporation with full
power of substitution in the premises. If such right to purchase shares of
Common Stock of the Company shall not include all of the shares of Common Stock
issuable as provided in such Warrant, the undersigned requests that a new
Warrant of like tenor and date for the balance of the shares of Common Stock
issuable thereunder be delivered to the undersigned. All capitalized terms used
but not defined in this Assignment shall have the meanings given to them in the
Warrant.
Date: Assignor:
------------------ ------------------------
By:
------------------------
Name:
------------------------
Title:
------------------------
The undersigned Assignee hereby accepts the sale, assignment and
transfer of the Warrant as set forth in this Assignment and acknowledges and
agrees that the Assignee's rights in and to such Warrant are subject to the
terms set forth in the Warrant and the Registration Rights Agreement.
Date: Assignee:
------------------ ------------------------
By:
------------------------
Name:
------------------------
Title:
------------------------
NOTICE: The signature of the Assignor on this Assignment must correspond with
the name as written upon the face of the Warrant in every particular, without
alteration or enlargement of any change whatsoever.EXHIBIT C
<PAGE>
NOTICE OF EXERCISE OF PUT OPTION
[To be executed only upon exercise of the Put Option set forth in the Warrant]
The undersigned registered owner of the attached Warrant No. __ to
purchase Common Stock of Equivest Finance, Inc. irrevocably exercises such
owner's Put Option pursuant to Section 8 of such Warrant, subject to the terms
of such Put Option set forth in the Warrant. All capitalized terms used but not
defined in this Assignment shall have the meanings given to them in the Warrant.
Date:
----------------------
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this notice of exercise must correspond with the name
as written upon the face of the Warrant in every particular, without alteration
or enlargement of any change whatsoever.
<PAGE>
Schedule A
WARRANT AGREEMENT
Schedule of excluded Stock Issuances
1. Common Stock issued in exchange of Series 2 Class A Preferred Stock held by
the Consolidated Bennett Bankruptcy Estates as outlined in the Notice of
Evidentiary Hearing on Trustee's Motion under 11 USC ss.363(b) to sell
Common Stock in Equivest as long as such Common Stock is issued for Fair
Market Value dated July 10, 1998 ("Bankruptcy Motion").
2. Common Stock issued as a dividend on the Series 2 Class A Preferred Stock
as specified in the Designation of Rights and Preferences for such
Preferred Stock.
3. Common Stock, or rights to acquire common stock of Equivest to be issued
pursuant to Equivest's existing employee benefit plans, including its
Employee Stock Option Plan, and its existing employment contracts.
4. Common Stock to be issued by Equivest to acquire Eastern Resorts
Corporation as specified in the Agreement and Plan of Merger dated the date
hereof by and among Equivest Finance, Inc. ERC Acquisition Corp., and
Eastern Resorts ("Merger Agreement").
5. In the event Equivest enters into an employment contract (approved by the
Board of Equivest) to retain the services of a Chief Executive Officer, any
Common Stock, or rights to acquire Common Stock issuable pursuant thereto,
except for any grants of rights to acquire Common Stock at less than the
market price of the Common Stock on the date of the grant of such right.
6. The issuance of the Consolidated Bennett Bankruptcy Estate of shares of
Common Stock to resolve claims involving payments related to Socfo-Mead as
described in Schedule 2.9(a) to the Merger Agreement.
8. The proposed 1998 offering of Common Stock by Equivest described in
the Bankruptcy Motion.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of the
17th day of July, 1998, by and between EQUIVEST FINANCE, INC., a Florida
corporation (the "Company"), and CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL
LLC, a Delaware limited liability company ("Warrantholder").
RECITAL
WHEREAS, the Company and the Warrantholder desire to provide for the
rights of the Warrantholder with respect to registration of the securities
issued to the Warrantholder upon exercise of Warrant issued to Warrantholder
dated July 17, 1998.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
1.1 "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.2 "Convertible Securities" shall mean the Warrant or other
securities of the Company convertible into or exchangeable (upon exercise or
otherwise) for Registrable Securities.
1.3 "Holder" shall mean any holder of outstanding Registrable
Securities, and any holder of Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with
Section 9 hereof, which Registrable Securities have not been sold to the public.
1.4 The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act ("Registration Statement"), and
the declaration or ordering of the effectiveness of such Registration Statement.
1.5 "Registrable Securities" shall mean all Common Stock of
the Company issued or issuable upon exercise of the Warrant including Common
Stock issued pursuant to recapitalizations, stock splits, stock dividends and
similar distributions with respect to such shares.
1.6 "Registration Expenses" shall mean all expenses incurred
in complying with Section 2 of this Agreement, including, without limitation,
all federal and state registration, qualification and filing fees, printing
expenses, blue sky fees and expenses, and the expense of any
<PAGE>
special audits incident to or required by any such registration, other than
Selling Expenses, as well as fees and disbursements not to exceed ten thousand
dollars ($10,000) of one special legal counsel for the selling Holders.
1.7 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.8 "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities
pursuant to this Agreement.
2. REGISTRATION RIGHTS.
2.1 Notice of Registration and Inclusion of Registrable
Securities. On the terms and subject to the conditions of this Agreement, in the
event the Company decides to register any of its Common Stock for its own
account or for the account of security holders other than the Warrantholder on a
form, that would be suitable for a registration involving Registrable
Securities, the Company will: (a) promptly give each Holder written notice
thereof (which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and (b) include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request delivered to the Company by any Holder within fifteen (15) days
after delivery of such written notice from the Company.
2.2 Underwriting in Piggyback Registration.
(a) Notice of Underwriting in Piggyback Registration.
If the registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the Holders as a
part of the written notice given pursuant to Section 2.1. In such event, the
right of any Holder to registration shall be conditioned upon such underwriting
and the inclusion of such Holder's Registrable Securities in such underwriting
to the extent provided in this Section 2. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into a customary underwriting agreement with the Underwriter's Representative
selected by the Company for such offering. The Holders shall have no right to
participate in the selection of the underwriters for an offering pursuant to
this Section 2.
(b) Marketing Limitation. In the event the
representative of the Company's underwriter or underwriters (the "Underwriter's
Representative") advises the Company that market factors (including, without
limitation, the aggregate number of shares of Common Stock requested to be
registered, the general condition of the market, and the status of
2
<PAGE>
the persons proposing to sell securities pursuant to the registration) require a
limitation of the number of shares to be underwritten, the Underwriter's
Representative may:
(1) in the case of the Company's first
public offering of its Common Stock or other securities pursuant to the
Registration Statement declared effective with the Commission after the
date of this Agreement (the "IPO"), exclude some or all Registrable
Securities from such registration and underwriting; and
(2) in the case of any registered public
offering subsequent to the IPO, limit the number of shares of
Registrable Securities to be included in such registration and
underwriting to not less than twenty percent (20%) of the total
securities to be registered. In such event, the Underwriter's
Representative shall so advise all Holders and the number of shares of
Registrable Securities that may be included in the registration and
underwriting (if any) shall be allocated among all Holders of
Registrable Securities in proportion, as nearly as practicable, to each
Holder's pro rata amount of Registrable Securities held by such Holder
at the time of filing of the Registration Statement. The number of
shares of Registrable Securities to be included in such underwriting
shall not be reduced unless all other securities (including the
securities subject to the Stockholders Agreement between Company and R.
Perry Harris and Karen Harris dated July __, 1998 but excluding those
to be sold by the Company) are excluded from the underwriting in
proportion, as nearly as practicable, to each holder's pro rata amount
of the aggregate of Registrable Securities and such other securities.
No Registrable Securities or other securities excluded from the
underwriting by reason of this subsection 2.2(b) shall be included in
such Registration Statement.
(c) Withdrawal in Piggyback Registration. If any
Holder, or a holder of other securities entitled (upon request) to be included
in such registration, disapproves of the terms of any such underwriting, such
Holder may elect to withdraw therefrom by written notice to the Company and the
underwriter delivered at least seven (7) days prior to the effective date of the
Registration Statement. Any Registrable Securities or other securities excluded
or withdrawn from such underwriting shall be withdrawn from such registration.
2.3 Blue Sky in Piggyback Registration. In the event of any
registration of Registrable Securities pursuant to this Section 2, the Company
will exercise its best efforts to register and qualify the securities covered by
the Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Holders shall reasonably request and as shall be reasonably
appropriate for the distribution of such securities; provided, however, that the
Company shall not be required to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions.
3
<PAGE>
3. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with registrations pursuant to Section 2 shall be borne by the
Company. All Selling Expenses shall be borne by the Holders of the securities
registered pro rata on the basis of the number of shares registered.
4. REGISTRATION PROCEDURES. The Company will keep each Holder whose
Registrable Securities are included in any registration pursuant to this
Agreement advised as to the initiation and completion of such registration. At
its expense the Company will: (a) use its best efforts to keep such registration
effective for a period of ninety (90) days or until the Holder or Holders have
completed the distribution described in the Registration Statement relating
thereto, whichever first occurs; (b) furnish such number of prospectuses
(including preliminary prospectuses) and other documents as a Holder from time
to time may reasonably request; (c) prepare and file with the commission such
amendments and supplements to such Registration Statement and the prospectus
used in connection with such Registration Statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement; and (d) notify each
Holder of Registrable Securities covered by such Registration Statement at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the prospectus
included in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing. If, at any time after giving such
written notice of its intention to register any of such securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
securities, the Company may, at its election, give written notice of such
determination to each Holder of Registrable Securities that has requested to
register Registrable Securities and thereupon the Company shall be relieved of
its obligation to pay any Registrable Expenses in connection therewith to the
extent provided in Section 3).
5. INFORMATION FURNISHED BY HOLDER. It shall be a condition precedent
of the Company's obligations to any Holder under this Agreement that such Holder
of Registrable Securities included in any registration furnish to the Company
such information regarding such Holder and the distribution proposed by such
Holder of Holders as the Company may reasonably request.
6. INDEMNIFICATION.
6.1 Company's Indemnification of Holders. To the extent
permitted by law, the Company will indemnify each Holder, each of its officers,
directors, employees and constituent partners, and each person controlling such
Holder, with respect to which registration, qualification or compliance of
Registrable Securities has been effected pursuant to this Agreement, and each
underwriter, if any, and each person who controls any underwriter against all
claims, losses, damages or liabilities (or actions in respect thereof) to the
extent such claims,
4
<PAGE>
losses, damages or liabilities arise out of or are based upon any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus or other document (including any related Registration Statement)
incident to any such registration, qualification or compliance, or are based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act, the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or any state securities law, or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law, applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance; and the Company will reimburse each such Holder,
each of its officers, directors, employees and constituent partners, each such
underwriter, and each person who controls any such Holder or underwriter, for
any legal and any other expenses reasonably incurred, as incurred, in connection
with investigating or defending any such claim, loss, damage, liability or
action; provided, however, that the indemnity contained in this Section 6.1
shall not apply to amounts paid in settlement of any such claim, loss, damage,
liability or action if settlement is effected without the consent of the Company
(which consent shall not unreasonably be withheld); and provided, further, that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based upon any
untrue statement or omission based upon written information furnished to the
Company by such Holder, its officers, directors, employees, constituent
partners, or legal counsel, underwriter, or controlling person and stated to be
for use in connection with the offering of securities of the Company.
6.2 Indemnification Procedure. Promptly after receipt by an
indemnified party under this Section 6 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 6, notify the indemnifying
party in writing of the commencement thereof and generally summarize such
action. The indemnifying party shall have the right to participate in and to
assume the defense of such claim, jointly with any other indemnifying party
similarly noticed; provided, however, that the indemnifying party shall be
entitled to select counsel for the defense of such claim with the approval of
any parties entitled to indemnification, which approval shall not be
unreasonably withheld; provided further, however, that if either party
reasonably determines that there may be a conflict between the position of the
Company and the Holders in conducting the defense of such action, suit or
proceeding by reason of recognized claims for indemnity under this Section 6,
then counsel for such party shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interest of such party. The failure to notify an indemnifying party promptly of
the commencement of any such action, if prejudicial to the ability of the
indemnifying party of defend such action, shall relieve such indemnifying party,
to the extent so prejudiced, of any liability to the indemnified party under
this Section 6, but the omission so to notify the indemnifying party will not
relieve such party of any liability that such party may have to any indemnified
party otherwise other than under this Section 6.
5
<PAGE>
7. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making
available to the Holders the benefits of Rule 144 under the Securities Act
("Rule 144") and any other rule or regulation of the Commission that may at any
time permit a Holder to sell securities of the Company to the public without
registration, the Company shall:
(a) make and keep public information available, as
required by Rule 144, at all times after ninety (90)
days after the effective date of the IPO;
(b) file with the Commission in a timely manner all
reports and other documents required of the Company
under the Securities Act and the Exchange Act; and
(c) furnish to any Holder, so long as such Holder owns
any Convertible Securities or Registrable Securities,
forthwith upon request (i) a written statement by the
Company that it has complied with the reporting
requirements of Rule 144 (at any time after ninety
(90) days after the effective date of the IPO), the
Securities Act and the Exchange Act (at any time
after it has become subject to such reporting
requirements); (ii) a copy of the most recent annual
or quarterly report of the Company and such other
reports and documents so filed by the Company; and
(iii) such other information as may be reasonably
requested in availing any Holder of any rule or
regulation of the Commission which permits the
selling of any such securities without registration.
8. TERMINATION OF REGISTRATION RIGHTS. The right to cause the Company
to register securities granted by the Company to the Holders under the Agreement
shall terminate as to each Holder on the earlier of (a) such time as such Holder
owns less than one percent (1%) of the outstanding stock of the Company
(assuming exercise of the Warrant) and is free to sell all of such stock within
a given three (3) month period to the public pursuant to Rule 144; or (b) at
such time as Holder is free to sell all of the stock issuable upon exercise of
the Warrant pursuant to Rule 144(k).
9. TRANSFER OF RIGHTS. The registration rights of the Holders set forth
in this Agreement may be assigned by any Holder to a transferee or assignee of
any Convertible Securities or Registrable Securities not sold to the public
acquiring Convertible Securities or Registrable Securities equaling in aggregate
at least one percent (1%) of the Company's then outstanding equity securities or
all of the Convertible Securities and Registrable Securities held by such Holder
if transferred to a single entity; provided, however, that (a) the Company must
receive written notice prior to the time of said transfer, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such information and registration rights are being assigned;
and (b) the transferee or assignee of such rights must not be a person deemed by
the Board of Directors of the Company to be a competitor or potential competitor
of the Company. Notwithstanding the limitation set forth in the foregoing
sentence
6
<PAGE>
respecting the minimum number of shares that must be transferred, any Holder may
transfer such Holder's registration rights to (i) any subsidiary, parent,
general partner or limited partner of such Holder, or any other person or entity
directly or indirectly controlling, controlled by or under common control with
such Holder; or (ii) such Holder's family members by will or intestacy in the
case of individuals, without restriction as to the number or percentage of
shares acquired by any such entity or individuals.
10. MISCELLANEOUS.
10.1 Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth herein
or therein.
10.2 Successors And Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including permitted transferees of any shares of the Registrable Securities or
Convertible Securities). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
10.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements among
New York as applied to agreements among New York residents entered into and to
be performed entirely within New York.
10.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.5 Title and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10.6 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified by hand or
professional courier service, by telecopy or by facsimile, one (1) day after
deposit with Federal Express or other overnight delivery service, or two (2)
days after deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature pages hereof, or at such other
address as such party may designate by five (5) days' advance written notice to
the other parties.
7
<PAGE>
10.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term o this Agreement may be waived (either
generally or in a particular instance, either retroactively or prospectively,
and either for a specified period of time or indefinitely), with the written
consent of the Company and a majority in interest of the Holders. Any amendment
or waiver effected in accordance with this Section 10.7 shall be binding upon
each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities have been
converted), each future holder of all such securities and the Company. Upon the
effectuation of each such amendment or waiver, the Company shall promptly give
written notice thereof to the record holders of the Stock and such Common Stock
who have not previously consented thereto in writing.
10.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
10.9 Separability. Any invalidity, illegality or limitation of
the enforceability with respect to any Holder of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Holder's domicile or otherwise, shall in no way affect or
impair the validity, legality or enforceability of this Agreement with respect
to other Holders. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, it shall to the extent practicable, be modified so as
to make it valid, legal and enforceable and to retain as nearly as practicable
the intent of the parties, and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the day and year first above written.
EQUIVEST FINANCE, INC.
By:
-----------------------------------
Name:
Chairman and CEO
WARRANTHOLDER:
CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL, LLC
By:
-----------------------------------
Name:
Title:
Address:
9
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS THE ISSUER HAS RECEIVED AN
OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER, THAT SUCH OFFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS
OTHERWISE IN COMPLIANCE WITH THE SECURITIES ACT AND SUCH LAWS. THE SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO CERTAIN RIGHTS AND
OBLIGATIONS AS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT, DATED AS OF
NOVEMBER 14, 1997, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE COMPANY.
AMENDED AND RESTATED WARRANT
To Purchase Common Stock of
EQUIVEST FINANCE, INC.
THIS IS TO CERTIFY THAT CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
(the "Initial Holder") a Delaware limited liability company, or its registered
assigns, is entitled, at any time prior to the Expiration Date (as hereinafter
defined), to purchase from EQUIVEST FINANCE, INC., a Florida corporation (the
"Company"), one hundred twenty-five thousand (125,000) shares of Common Stock
(as hereinafter defined and subject to adjustment as provided herein), in whole
or in part, at a purchase price, subject to adjustment, as provided herein, of
$3.50 per share and one hundred twenty-five thousand shares of Common Stock (as
hereinafter defined and subject to adjustment as provided herein), in whole or
in part, at a purchase price, subject to adjustment, as provided herein, of
$4.00 per share, all on the terms and conditions and pursuant to the provisions
hereinafter set forth. This Ameded and Restated Warrant amends, restates,
supercedes and replaces the "Warrant to Purchase Shares of Common Stock of
Equivest Finance, Inc." issued on November 14, 1997 by Company to Initial
Holder.
Definitions. As used in this Agreement, the following terms
have the respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Initial Date, other than any
Warrant Stock.
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which banking institutions in the State of New York are
authorized or required by law or executive order to close or a day which is
declared a national holiday.
"Close of Business" shall have the meaning set forth in
Section 2(a).
"Commission" shall mean the Securities and Exchange Commission
as from time to time constituted, created under the Exchange Act, or if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it, then the body performing such duties
on such date.
<PAGE>
"Common Stock" shall mean the class of stock which, at the
date of this instrument, is designated as common stock, $.05 par value, of the
Company and the class or classes of stock, if any, into which such common stock
may thereafter be changed or reclassified.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, as in effect
from time to time.
"Excluded Shares" means (without duplication) (i) all shares
of Common Stock issued in an Offering, and (ii) those shares of Common Stock
issued or issuable as described in Schedule A attached hereto and incorporated
herein.
"Exercise Price" shall have the meaning set forth in Section
2(b) hereof.
"Expiration Date" shall have the meaning set forth in Section
2(a) hereof.
"Fair Market Value" of a share of Common Stock shall mean, as
of any specific date of determination (the "Determination Date") the price per
share of such Common Stock equal to the average of the last sale price of such
Common Stock on each of the ten trading days (or such lesser number of days as
shares shall have been listed or traded) prior to the Determination Date on the
principal exchange on which the Common Stock may at the time be listed; or, if
there shall have been no sales on such exchange on any such trading day, the
average of the closing bid and asked prices on such exchange on such trading
day; or, if there is no such bid and asked price on any such trading day, on the
next preceding date when such bid and asked price occurred; or, if the Common
Stock shall not be so listed, the average of the closing sales prices as
reported by NASDAQ, the American Stock Exchange, the New York Stock Exchange or
whichever exchange on which Company's Common Stock is listed, at the end of each
of the ten trading days prior to the Determination Date; provided that if one
class of the Common Stock is listed or reported as described in this sentence
but the class of Common Stock with respect to which Fair Market Value is being
measured is not so listed or reported, then the Fair Market Value per share with
respect to such unlisted and unreported class shall be identical to such listed
or reported class; and provided further that if Common Stock is not publicly
traded and listed on a national stock exchange or on NASDAQ on the Determination
Date, the Fair Market Value shall be an amount as reasonably determined in good
faith by the Company's Board of Directors upon a review of the relevant factors
and reflecting the unique characteristics of the Company and supported by a
written opinion of an investment banking firm that is nationally recognized in
the United States, it being the intention of the parties that the value of a
share of Common Stock shall constitute a pro rata portion of the Company's
equity on a fully diluted basis, valuing the Company as a going concern and
without discount in respect of a minority interest.
"Holder" shall mean the Initial Holder and any Person or
Persons to whom this Warrant is transferred pursuant to Section 5 hereof
including those Person or Persons in whose name or names the Warrant is
registered from time to time on the Warrant Register.
"Initial Date" shall mean November 14, 1997.
"Initial Holder" shall mean Credit Suisse First Boston
Mortgage LLC.
"Offering" shall mean an offering of newly issued shares of
any class of Common Stock (whether alone or in conjunction with any secondary
public offering) placed or underwritten by an investment banking firm that is
nationally recognized in the United States which produces net cash proceeds for
the Company or its affiliates (as defined in Rule 12b-2 of the Exchange Act of
1934, as amended) of at least $35,000,000 and immediately after
<PAGE>
which the Common Stock is listed or admitted for trading on the NASDAQ Small Cap
or National Market, the American Stock Exchange or the New York Stock Exchange.
"Office of the Company" shall mean the principal executive
offices of the Company as notified from time to time pursuant to Section 14 or
the office or agency of the Company designated pursuant to Section 12.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any wholly-owned subsidiary thereof.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Initial Date, by and among the Company and the Initial
Holder, a copy of which is on file at the Office of the Company.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, as in
effect from time to time.
"Stock Register" shall mean the register maintained by the
Company to record ownership and transfer of Common Stock.
"Warrant" or "Warrants" shall mean this Warrant and all
warrants issued upon transfer, division or combination of, or in substitution
for, thereof.
"Warrant Register" shall mean the register maintained by the
Company to record ownership and transfers of this Warrant pursuant to the terms
hereof.
"Warrant Stock" shall mean the shares of Common Stock
purchased upon exercise of this Warrant.
Duration and Exercise of Warrant.
Duration. The Warrant shall expire on November 14,
2002 (the "Expiration Date"). The Warrant may be exercised at any time on or
prior to the last Business Day prior to the Expiration Date; provided, however,
that if exercised on such last Business Day, such exercise must occur before
5:00 p.m. Eastern Standard Time (the "Close Of Business") on such Day.
Thereafter, the Warrant will become wholly void and of no value.
Exercise. Subject to the provisions of this
Agreement, the Holder of this Warrant shall have the right to purchase from the
Company (and the Company shall issue and sell to such Holder) the aggregate
number of fully paid and nonassessable shares of Common Stock of the Company set
forth on the first page hereof (or such additional number of shares as may be
further provided in this Agreement) at the purchase price per share set forth on
the first page hereof, as adjusted from time to time as provided in this
Agreement provided that no such adjustment shall cause such purchase price per
share to be less than par value (such price, as so adjusted being referred to
herein as the "Exercise Price"). The Exercise Price shall be payable (i) in cash
or by bank cashier's check in United States funds payable to the order of the
Company or (ii) if the Common Stock is listed on a securities exchange or
interdealer quotation system, in the manner set forth in Section 2(c) hereof if
requested by the Holder in the notice of exercise hereafter described. The
Warrant shall be exercisable by (i) delivering to the Company the form of notice
of exercise attached hereto as Exhibit A duly completed and signed by the Holder
or by the duly appointed legal representative or duly authorized attorney
thereof, and (ii) within five Business Days thereafter,
<PAGE>
depositing with the Company the certificate evidencing the Warrant and paying
the aggregate Exercise Price for the number of shares of Common Stock in respect
of which the Warrant is being exercised; provided, that the Exercise Price must
in any event be paid and the certificate representing the Warrant deposited with
the Company prior to the Close of Business on the fifth Business Day following
delivery of such notice. Upon each partial exercise of the Warrant, a new
Warrant evidencing the balance of the shares of Common Stock issuable hereunder
will be issued to the Holder, as soon as reasonably practicable, on the same
terms as the Warrant partially exercised.
Cashless Exercise. In lieu of any cash payment
required upon exercise of the Warrant, the Holder may elect to exercise this
Warrant in full or in part by surrendering this Warrant in the manner specified
in Section 2(b) hereof in exchange for the number of shares of Common Stock
equal to the product of (i) the number of shares of Common Stock as to which the
Warrant is being exercised multiplied by (ii) a fraction, (y) the numerator of
which is the Fair Market Value of a share of Common Stock on the date of
exercise less the Exercise Price, and (z) the denominator of which is the Fair
Market Value of a share of Common Stock on such date of exercise.
Payment of Taxes and Expenses. The Company shall pay all
expenses in connection with, and all taxes and other governmental charges that
may be imposed with respect to, the issuance or delivery of this Warrant and the
Warrant Stock, unless any such tax or charge is imposed by law upon the Holder,
in which case such tax or charge shall be paid by the Holder. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issuance of any certificate for shares of
Common Stock in any name other than that of the Holder, and in such case the
Company shall not be required to issue or deliver any stock certificate until
such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
Fractional Shares. The Company shall not be required to issue
a fractional share of Common Stock upon exercise of the Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon any exercise of the Warrant, the Company shall pay a cash adjustment in
respect of such fraction in any amount equal to the same fraction of the Fair
Market Value of the Common Stock on the date of exercise, less the portion of
the Exercise Price attributable to such fraction.
Transfer, Division and Combination.
Transfer. Subject to compliance with the provisions
of Section 10, transfers of this Warrant, in whole or in part, shall be recorded
on the Warrant Register upon surrender of the Warrant at the Office of the
Company, together with (i) a written assignment substantially in the form of
Exhibit B hereto, duly completed and signed by the Holder or by the duly
appointed legal representative or duly authorized attorney thereof and (ii)
funds sufficient to pay any applicable transfer taxes or evidence that any such
transfer taxes have been paid or that no such transfer taxes are due. Upon such
surrender and, if required, such payment, the Company shall, subject to
compliance with Section 10, execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination or denominations
specified in the instrument or assignment, and shall issue to the assignor a new
Warrant evidencing any portion of this Warrant not so assigned, and this Warrant
certificate shall promptly be canceled. A Warrant, if properly assigned in its
entirety in compliance with Section 10, may be exercised by the new Holder
without the issuance of a new Warrant certificate.
Division and Combination. Subject to compliance with
Section 10, this Warrant may be divided or combined with other Warrants upon
presentation thereof at the Office of the Company, together with a written
notice specifying the name or names and denomination or denominations in which a
new Warrant or new Warrants are to be issued, signed by the Holder or by the
duly appointed legal representative or duly authorized attorney thereof. Subject
to compliance with Section 10 as to any transfer which may be involved in such
division
<PAGE>
or combination, the Company shall execute and deliver a new Warrant or Warrants
in exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
Maintenance of Warrant Register. The Company agrees
to maintain the Warrant Register at all times prior to the Expiration Date at
the Office of the Company, and to cause the Warrant Register to be available for
inspection during normal working hours by any Holder or its representatives or
any prospective purchaser of a Warrant designated by a Holder or its
representatives.
Adjustments.
Adjustment. The number of shares of Common Stock for
which this Warrant is exercisable and the Exercise Price at which such shares
may be purchased shall be subject to adjustment from time to time as set forth
in this Section 6.
Stock Dividends, Subdivisions and Combinations. If at
any time the Company shall:
declare, order, pay or make a dividend on
Common Stock payable in Additional Shares of Common Stock;
subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock;
then (A) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the happening of such event shall be adjusted to
equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock immediately prior to the happening of such
event would own or be entitled to receive after the happening of such event, and
(B) the Exercise Price shall be adjusted to equal (1) the Exercise Price in
effect immediately prior to such event multiplied by the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (2) the number of shares for which this Warrant is
exercisable immediately after such adjustment.
Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding shares of Common Stock evidence of
indebtedness of the Company, cash (including cash dividends payable out of
consolidated earnings or earned surplus) or assets or securities other than
Additional Shares of Common Stock, including stock of a subsidiary but excluding
dividends or distributions referred to in Section 6(b) above (any such evidences
of indebtedness, cash, assets or securities, the "assets or securities"), then,
in each case, the number of shares of Common Stock issuable after such record
date to Holder upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock issuable upon the exercise of
such Warrant immediately prior to such record date by a fraction, the numerator
of which shall be the Fair Market Value per share of Common Stock immediately
prior to the record date for such distribution and the denominator of which
shall be the Fair Market Value per share of Common Stock immediately prior to
the record date for such distribution less the then fair value (as determined in
good faith by the Board) of the evidences of its indebtedness, cash or assets or
other distributions so distributed attributable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to the record date for
the determination of shareholders entitled to receive such distribution. Any
adjustment required by this Section 6(c) shall be made whenever any such
distribution is made, and shall become effective on the date of
<PAGE>
such distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution.
Reorganization, Reclassification, Consolidation or
Merger. If the Company shall (i) effect any reorganization or reclassification
of its capital stock or (ii) consolidate or merge with or into, or transfer all
or substantially all of its properties and assets to, any other person, in
either case in a transaction in connection with which a Holder has not exercised
this Warrant, then, upon any exercise of this Warrant subsequent to the
consummation thereof, such Holder shall be entitled to receive, in lieu of the
Common Stock issuable upon exercise immediately prior to such consummation, the
highest amount of stock, other securities or property (including cash) to which
such Holder would have been entitled upon such consummation if such Holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustments thereafter as provided in this Section 6.
Antidilution Adjustments.
Certain Definitions. As used in this subsection
6(e), the following terms shall have the following respective meanings:
"Base Price" means the Fair Market Value per
share of Common Stock, as determined from time to time as provided in this
Warrant.
"Options" means rights, options or warrants
to subscribe for, purchase or otherwise acquire either shares of Common Stock or
Convertible Securities.
"Convertible Securities" means any evidence
of indebtedness, shares of stock or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
"Issue" or "Issued" means, with respect to
any security (including Options), the grant, issue or sale thereof, as the case
may be.
"Additional Shares of Common Stock" means,
for purposes of adjusting the Base Price pursuant to subsection (e)(iii) of this
Section 6, all shares of Common Stock issued (or, pursuant to subsection (e)(ii)
of this Section 6 deemed to be issued) by the Company after the Initial Date
(exclusive of shares issued upon exercise or conversion of any Options or
Convertible Securities granted or issued prior to the Initial Date) without
consideration or for a consideration (determined pursuant to subsection (e)(iv)
of this Section 6) per share less than the Base Price in effect on the date
immediately prior to such issue, other than Excluded Shares.
Issue of Securities Deemed to be Issue of
Additional Shares of Common Stock. In the case the Company at any time, or from
time to time after the Initial Date, shall Issue any Options or Convertible
Securities, or shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or Convertible
Securities, then the maximum number of shares (as set forth in the instrument
relating thereto without regard to the provisions contained therein for a
subsequent adjustment of such number) of Common Stock issuable upon the exercise
of such Options, or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such Issue or, in
case such a record date shall have been fixed, as of the close of business on
such record date; provided, however, that Additional Shares of Common Stock
shall not be deemed to have been Issued unless the consideration per share
(determined pursuant to subsection (e)(iv) of this Section 6) of such Additional
Shares of Common Stock is less than the Base Price in effect immediately prior
to such Issue, or such record date, as the case may be. In any case:
<PAGE>
no further adjustment of the number of
Additional Shares of Common Stock shall be made upon the subsequent Issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible Securities;
if Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company, or any increase or
decrease in the number of shares of Common Stock issuable upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the number of
shares issuable upon exercise of this Warrant shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options, or the rights of conversion or exchange
under such Convertible Securities, which are outstanding at such time; and
upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the number of shares issuable upon exercise of
this Warrant computed upon the original issue thereof (or upon the occurrence of
a record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if:
in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Company for the issue of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, or for the
issue of all such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually received by the
Company upon such conversion or exchange, and
in the case of Options for Convertible
Securities, the only Convertible Securities issued were Convertible Securities,
if any, actually issued upon the exercise of such Options, and the consideration
received by the Company for the Additional Shares of Common Stock deemed to have
been issued was the consideration actually received by the Company for the issue
of all such Options, whether or not exercised, plus the consideration actually
received by the Company upon the issue of the Convertible Securities with
respect to which such Options were actually exercised.
Adjustments to Base Price. In the event the Company
shall issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to subsection (e)(ii) of this Section
6) without consideration or for a consideration per share less than the Base
Price in effect immediately prior to the issuance of such Additional Shares of
Common Stock, then and in each such case, the Base Price in effect on the date
of and immediately prior to such issuance shall be adjusted, concurrently with
such issue, to a price (calculated to the nearest cent) determined by
multiplying such Base Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of Additional Shares of Common
Stock so issued would purchase at such Base Price, including for such purposes
the consideration paid and payable for Additional Shares of Common Stock deemed
issued pursuant to subsection (e)(ii) of the Section 6, in accordance with
subsection (e)(iv) of this Section 6, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued and deemed
issued under subsection (e)(ii) of this Section 6. The Base Price, as adjusted
from time to time, shall be used to calculate in accordance with Section
6(e)(vi) below the additional number of shares of Common Stock the Holder is
entitled to purchase upon exercise of this Warrant.
<PAGE>
Computation of Consideration. For purposes
of this subsection 6(e), the consideration received by the Company for the Issue
of any Additional Shares of Common Stock shall be computed as follows:
Nature of Consideration. Such consideration shall,
insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Company, excluding
amounts paid or payable for accrued interest or accrued dividends;
insofar as it consists of marketable
"securities", be computed at the fair market value thereof at the time of issue
as determined in the manner provided for the Common Stock in the definition of
"Fair Market Value;"
insofar as it consists of property other
than cash or marketable securities, be computed at the fair market value thereof
at the time of such Issue, as determined in good faith by the Company's Board of
Directors;
in the event Additional Shares of Common
Stock are issued together with other stock or securities or other assets of the
Company for consideration so received, computed as provided in clauses (1) and
(2) above, as determined in good faith by the Company's Board of Directors; and
in the event that the consideration
received by the Company for the issue of any additional shares of common stock
exceeds ten million dollars ($10,000,000) in any single transaction, then the
Board of Directors shall obtain a written opinion of an investment banking firm
that is nationally recognized in the United States to support the determination
of the Board of Directors under subsections 6(e)(iv)(3) and (4).
Options and Convertible Securities. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been Issued pursuant to subsection (e)(ii)(A) of this
Section 6, relating to Options and Convertible Securities, shall be determined
by dividing:
Options and Convertible Securities.
the amount, if any, received or
receivable by the Company as consideration for the Issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities or, in the case of Options
for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
Splits, Subdivisions or Combinations of
Shares and Stock Dividends. If the Company at any time while this Warrant
remains outstanding and unexpired shall split, subdivide, combine its
<PAGE>
Common Stock or declare a stock dividend, the Base Price shall be
proportionately decreased in the case of a split or subdivision or share
dividend, or proportionately increased in the case of a combination. Any
adjustment under this subsection shall become effective when the split,
subdivision or combination becomes effective and notwithstanding this subsection
6(e)(v), in no event shall the purchase price for the Warrant Stock exceed $3.50
per share for 125,000 Shares of Common Stock and $4.00 for the other 125,000
Shares of Common Stock..
Number of Additional Shares Issuable Upon
Exercise of this Warrant. Upon such adjustment of the Base Price resulting from
the provisions of subsection (e)(iii) of this Section 6, the number of shares of
Common Stock issuable upon exercise of this Warrant shall be increased by an
amount determined by multiplying the number of shares of Common Stock which the
Holder was entitled to purchase pursuant to this Warrant immediately prior to
such adjustment (all as adjusted for stock splits subdivisions, combinations and
stock dividends) by a fraction, (i) the numerator of which shall be the Base
Price in effect immediately prior to such adjustment of the Base Price, and (ii)
the denominator of which shall be the newly adjusted Base Price calculated
pursuant to subsection (e)(iii) of Section 6.
Notices.
Notice of Adjustment. Whenever the number of shares
of Common Stock for which this Warrant is exercisable shall be adjusted pursuant
to Section 6, the Company shall forthwith prepare a certificate to be executed
by the chief financial officer of the Company setting forth, in reasonable
detail, the event requiring the adjustment, the method by which the adjustment
was calculated and describing the number of shares of Common Stock for which
this Warrant is exercisable after giving effect to such adjustment or change.
The Company shall promptly cause a signed copy of such certificate to be
delivered to each Holder. The Company shall keep at the Office of the Company
copies of all such certificates and cause the same to be available for
inspection during normal business hours by any Holder or any prospective
purchaser or a Warrant designated by a Holder.
Notice of Extraordinary Distributions. In the event
that the Company proposes to set a record date for the purpose of entitling
holders of its Common Stock to receive any dividend or other distribution (other
than dividends or distributions listed on Schedule A hereto) of:
cash in an amount in excess of the previous
regular cash dividend; or
any evidences of its indebtedness, any
shares of its stock or any other securities or property of any nature
whatsoever, including any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares or its stock of any other
securities or property;
then the Company shall deliver to each Holder written notice of such proposed
dividend or distribution at least 30 days prior to such proposed record date. A
reclassification of Common Stock (other than a change in par value, or from par
value to no par value or from no par value to par value) into shares of Common
Stock and shares of any other class of stock shall be deemed a distribution by
the Company to the holders of its Common Stock of such shares of such other
class of stock within the meaning of this Section 7(b) and, if the outstanding
shares of Common Stock shall be changed into a larger or smaller number of
shares of Common Stock as a part of such reclassification, shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of Section 6(b).
Notice of Certain Mergers and Asset Dispositions. In
the event that the Company proposes to consolidate with or merge into another
corporation in a transaction in which the Common Stock will be changed or
converted into other securities, cash or property, or to sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business to another corporation or other entity, the Company shall deliver to
each Holder
<PAGE>
written notice of such proposed transaction at least 15 days prior to the
earlier of its consummation or the taking of any record of the holders of its
Common Stock for the purpose of determining their rights pursuant to such
transactions.
Notice of Registration Statement. In the event that
the Company shall propose to file a registration statement under the Securities
Act after the Initial Date with respect to any shares of Common Stock of the
Company, it shall deliver to each Holder (i) at least 15 days' advance notice of
its intention to file such registration statement and the anticipated range of
prices at which the shares of Common Stock are proposed to be offered; (ii)
prompt notice of any change in such anticipated range of prices; and (iii)
notice by 10:00 a.m., New York City time, on the day prior to the date on which
the registration statement is expected to become effective.
Financial Statements of the Company. The Company
shall promptly deliver to the Holders any annual, quarterly or other financial
statements that are provided to any holders of equity or debt (other than bank
debt) securities of the Company in their capacity as holders of such securities.
Put Right. If the Company has not consummated an Offering
prior to three (3) years from July 17, 1998, this Warrant shall, for a period of
two (2) years thereafter (the "Put Period"), be immediately entitled to the
rights in this Section 8. The Company hereby grants to the Holder the option
(the "Put Option"), at any time during Put Period, to require the Company to
purchase this Warrant, in whole but not in part, at a price (the "Put Price")
equal to the Fair Market Value of the shares of Common Stock which would be
issued if this Warrant were exercised as of the date the Put Option is exercised
minus the Exercise Price for such shares. Further, solely for purposes of this
Section 8, if the Fair Market Value of shares of Common Stock are determined in
accordance with subparagraph (iii) under the definition of "Fair Market Value"
in Section 1 hereof, such determination shall reflect the value of the Common
Stock as if the Common Stock were fully distributable and freely tradeable in a
liquid public market as well as external market conditions. The Put Option shall
be exercised by the Holder by giving written notice to the Company in the form
attached hereto as Exhibit C. Payment of the Put Price, against delivery of this
Warrant duly endorsed by the Holder, shall be by means of a cash payment and
shall take place not later than 120 days after the date such notice is given by
the Holder, or if the Put Price shall not have been determined by such 120th
day, within 10 days after such determination.
Reservation and Authorization of Common Stock.
The Company shall at all times reserve and keep
available for issuance upon the exercise of the Warrant the maximum number of
its authorized but unissued shares of Common Stock as could then potentially be
required to permit the exercise in full of all outstanding Warrants. All shares
of Common Stock issuable upon exercise of any Warrant and payment therefor in
accordance with the terms of such Warrant shall be duly and validly issued and
fully paid and nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an
adjustment reducing the Exercise Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Exercise Price.
Legends.
Warrant Restrictive Legend. Except as otherwise
provided in this Section 10, each Warrant shall be stamped or otherwise
imprinted with a legend in substantially the following form:
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR UNLESS THE ISSUER HAS RECEIVED AN
OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER, THAT SUCH OFFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER
DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT AND SUCH LAWS. THE SHARES ISSUABLE
UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO CERTAIN RIGHTS
AND OBLIGATIONS AS SET FORTH IN A REGISTRATION RIGHTS
AGREEMENT, DATED AS OF NOVEMBER 14, 1997, A COPY OF WHICH IS
ON FILE AT THE OFFICE OF THE COMPANY.
Warrant Stock Restrictive Legend. Except as otherwise
provided in this Section 10, each certificate for Warrant Stock initially issued
upon the exercise of this Warrant, and each certificate for Warrant Stock issued
to any subsequent transferee of any such certificate, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT"), AND MAY
NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL TO THE HOLDER OF
THESE SHARES IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, THAT SUCH OFFER,
SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT
FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS. THE
SHARES ARE SUBJECT TO THE CONDITIONS SPECIFIED IN A CERTAIN WARRANT, DATED
NOVEMBER 14, 1997. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF SUCH WARRANT. THE SHARES
ARE SUBJECT TO CERTAIN RIGHTS AND OBLIGATIONS AS SET FORTH IN A REGISTRATION
RIGHTS AGREEMENT, DATED AS OF NOVEMBER 14, 1997, A COPY OF WHICH IS ON FILE AT
THE OFFICE OF THE COMPANY.
Termination of Restrictions. The legend requirements
of Sections 10(a) and 10(b) shall terminate when (i) the Registration Rights
Agreement has terminated and is no longer of any force and effect and (ii)
either (y) the security in question shall have been effectively registered under
the Securities Act and disposed of pursuant thereto or (z) the Company shall
have received an opinion of counsel reasonably satisfactory to it that such
legend is not required in order to insure compliance with the Securities Act.
Loss or Mutilation. Upon receipt by the Company from any
Holder of evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of this Warrant and an indemnity
reasonably satisfactory to it (and in case of mutilation upon surrender and
cancellation hereof), the Company will execute and deliver in lieu thereof a new
Warrant of like tenor to such Holder; provided, in the case of mutilation, no
indemnity shall be required if this Warrant in identifiable form is surrendered
to the Company for cancellation.
<PAGE>
Office of the Company. As long as any of the Warrants remain
outstanding, the Company shall maintain an office or agency (which may be the
principal executive offices of the Company) where the Warrants may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant, and where the Warrant Register shall be maintained.
No Rights or Liabilities as Stockholder. Nothing contained in
this Warrant shall be construed as conferring upon any Holder any rights as a
stockholder of the Company or as imposing any liabilities on such Holder to
purchase any securities or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or stockholders of the
Company or otherwise.
Notice. All notices, requests, demands, letters, waivers and
other communications required or permitted to be given here under shall be in
writing and shall be deemed to have been duly given if (a) delivered personally,
(b) mailed, certified or registered mail with postage prepaid, (c) sent by
next-day or overnight mail or delivery or (d) sent by telecopy or telegram, as
follows:
(i) If to the Initial Holder:
Credit Suisse First Boston
Mortgage Capital LLC
11 Madison Avenue
New York, New York 10010-3629
Attn: David Arzi, Director
(ii) If to any other Holder, at its last known address
appearing on the Warrant Register
(iii) If to the Company:
Equivest Finance, Inc.
Two Clinton Square
Syracuse, New York 13202
Attn: Eric C. Colton, Esq.
General Counsel
All such notices, requests, demands, letters, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, x) if by certified or registered mail, on the fifth
business day after the mailing thereof, (y) if by next-day or overnight mail or
delivery, on the day delivered or (z) if by telecopy or telegram, on the next
day following the day on which such telecopy or telegram was sent, provided that
a copy is also sent by certified or registered mail.
Successors and Assigns. This Warrant and the rights evidenced
hereby shall be binding upon and shall inure to the benefit of the successors of
the Company and the successors and assigns of the Holder. In addition, and
provided that an express assignment shall have been made, a copy of which shall
have been delivered to the Company, the provisions of this Warrant shall be for
the benefit of and enforceable by all Holders from time to time of this Warrant
and shall be enforceable by any Holder.
Amendment. This Warrant may be amended, modified or
supplemented or the provisions hereof waived only with the written consent of
the Company and the Holder.
<PAGE>
Headings. The headings and captions contained in this Warrant
are for convenience of reference only and shall not control or affect the
meaning or construction of any provision hereof.
GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and attested by its Secretary.
Dated: November 14, 1997
ATTEST: EQUIVEST FINANCE, INC.
By: By:
------------------------ ----------------------------
Name: Name: Richard C. Breeden
Title: Secretary Title: Chairman and CEO
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
[To be executed only upon exercise of the Warrant]
The undersigned registered owner of Warrant No. __ dated , to purchase
Common Stock of Equivest Finance, Inc. (the "Company"), irrevocably exercises
such Warrant for the purchase of ____ shares of Common Stock of the Company, and
hereby undertakes to make payment therefor and to deposit with the Company the
certificate representing such Warrant, in each case as set forth in Section 2(b)
thereof and at the price and on the other terms and conditions specified
therein. The undersigned requests that certificates for the shares of Common
Stock to be purchased pursuant hereto be issued in the name of and delivered to
__________ whose address is ___________________________________________________
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in such Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable thereunder
be delivered to the undersigned.
<PAGE>
If the Company's Common Stock is listed on a securities exchange or
interdealer quotation system, the undersigned [select one: (does) (does not)]
choose to pay the Exercise Price pursuant to a cashless exercise of the Warrant
pursuant to Section 2(c) of the Warrant.
- --------------------------------------------------------------------------------
(Name of Registered Owner)
- --------------------------------------------------------------------------------
(Signature of Registered Owner)
- --------------------------------------------------------------------------------
(Street Address)
- --------------------------------------------------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this notice of exercise must correspond with the name
as written upon the face of the Warrant in every particular, without alteration
or enlargement of any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT
[To be executed only upon transfer of the Warrant, in whole or in part,
in accordance with its terms]
FOR VALUE RECEIVED, the undersigned registered owner ("Assignor") of Warrant No.
__ to purchase Common Stock of Equivest Finance, Inc. (the "Company") hereby
sells, assigns and transfers unto
("Assignee")
(Name)
(Street Address)
(City, State, Zip Code)
the right to purchase __________ shares of Common Stock of the Company,
evidenced by such Warrant, together with all right, title and interest therein,
and does irrevocably constitute and appoint _____________________________
attorney to transfer the said right on the books of said corporation with full
power of substitution in the premises. If such right to purchase shares of
Common Stock of the Company shall not include all of the shares of Common Stock
issuable as provided in such Warrant, the undersigned requests that a new
Warrant of like tenor and date for the balance of the shares of Common Stock
issuable thereunder be delivered to the undersigned. All capitalized terms used
but not defined in this Assignment shall have the meanings given to them in the
Warrant.
Date: Assignor:
----------------------- ---------------------------------
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
<PAGE>
The undersigned Assignee hereby accepts the sale, assignment and
transfer of the Warrant as set forth in this Assignment and acknowledges and
agrees that the Assignee's rights in and to such Warrant are subject to the
terms set forth in the Warrant and the Registration Rights Agreement.
Date: Assignee:
----------------------- ---------------------------------
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
NOTICE: The signature of the Assignor on this Assignment must correspond with
the name as written upon the face of the Warrant in every particular, without
alteration or enlargement of any change whatsoever.
<PAGE>
EXHIBIT C
NOTICE OF EXERCISE OF PUT OPTION
[To be executed only upon exercise of the Put Option set forth in the Warrant]
The undersigned registered owner of the attached Warrant No. __ to
purchase Common Stock of Equivest Finance, Inc. irrevocably exercises such
owner's Put Option pursuant to Section 8 of such Warrant, subject to the terms
of such Put Option set forth in the Warrant. All capitalized terms used but not
defined in this Assignment shall have the meanings given to them in the Warrant.
Date:
-------------------
- --------------------------------------------------------------------------------
(Name of Registered Owner)
- --------------------------------------------------------------------------------
(Signature of Registered Owner)
- --------------------------------------------------------------------------------
(Street Address)
- --------------------------------------------------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this notice of exercise must correspond with the name
as written upon the face of the Warrant in every particular, without alteration
or enlargement of any change whatsoever.
<PAGE>
Schedule A to AMENDED AND RESTATED WARRANT
SCHEDULE OF EXCLUDED STOCK ISSUANCES
1. Common Stock issued in exchange of Series 2 Class A Preferred Stock
held by the Consolidated Bennett Bankruptcy Estates as outlined in the
Notice of Evidentiary Hearing on Trustee's Motion under 11 USC
ss.363(b) to sell Common Stock in Equivest as long as such Common Stock
is issued for Fair Market Value dated July 10, 1998 ("Bankruptcy
Motion").
2. Common Stock issued as a dividend on the Series 2 Class A Preferred
Stock as specified in the Designation of Rights and Preferences for
such Preferred Stock.
3. Common Stock, or rights to acquire common stock of Equivest to be
issued pursuant to Equivest's existing employee benefit plans,
including its Employee Stock Option Plan, and its existing employment
contracts.
4. Common Stock to be issued by Equivest to acquire Eastern Resorts
Corporation as specified in the Agreement and Plan of Merger dated July
17, 1998 by and among Equivest Finance, Inc. ERC Acquisition Corp., and
Eastern Resorts ("Merger Agreement").
5. In the event Equivest enters into an employment contract (approved
by the Board of Equivest) to retain the services of a Chief Executive
Officer, any Common Stock, or rights to acquire Common Stock issuable
pursuant thereto, except for any grants of rights to acquire Common
Stock at less than the market price of the Common Stock on the date of
the grant of such right.
6. The issuance of the Consolidated Bennett Bankruptcy Estate of shares
of Common Stock to resolve claims involving payments related to
Socfo-Mead as described in Schedule 2.9(a) to the Merger Agreement.
8. The proposed 1998 offering of Common Stock by Equivest described in
the Bankruptcy Motion.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of the
14th day of November, 1997, by and between EQUIVEST FINANCE, INC., a Florida
corporation (the "Company"), and CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL
LLC, a Delaware limited liability company ("Warrantholder").
RECITAL
WHEREAS, the Company and the Warrantholder desire to provide for the
rights of the Warrantholder with respect to registration of the securities
issued to the Warrantholder upon exercise of Amended and Restated Warrant issued
to Warrantholder dated November 14, 1997.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Convertible Securities" shall mean the Warrant or other
securities of the Company convertible into or exchangeable (upon exercise or
otherwise) for Registrable Securities.
"Holder" shall mean any holder of outstanding Registrable
Securities, and any holder of Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with
Section 9 hereof, which Registrable Securities have not been sold to the public.
The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act ("Registration Statement"), and
the declaration or ordering of the effectiveness of such Registration Statement.
"Registrable Securities" shall mean all Common Stock of
the Company issued or issuable upon exercise of the Warrant including Common
Stock issued pursuant to recapitalizations, stock splits, stock dividends and
similar distributions with respect to such shares.
"Registration Expenses" shall mean all expenses incurred
in complying with Section 2 of this Agreement, including, without limitation,
all federal and state registration, qualification and filing fees, printing
expenses, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration, other than Selling Expenses,
as well as fees and disbursements not to exceed ten thousand dollars ($10,000)
of one special legal counsel for the selling Holders.
<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities
pursuant to this Agreement.
REGISTRATION RIGHTS.
Notice of Registration and Inclusion of Registrable
Securities. On the terms and subject to the conditions of this Agreement, in the
event the Company decides to register any of its Common Stock for its own
account or for the account of security holders other than the Warrantholder on a
form, that would be suitable for a registration involving Registrable
Securities, the Company will: (a) promptly give each Holder written notice
thereof (which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and (b) include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request delivered to the Company by any Holder within fifteen (15) days
after delivery of such written notice from the Company.
Underwriting in Piggyback Registration.
Notice of Underwriting in Piggyback Registration.
If the registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the Holders as a
part of the written notice given pursuant to Section 2.1. In such event, the
right of any Holder to registration shall be conditioned upon such underwriting
and the inclusion of such Holder's Registrable Securities in such underwriting
to the extent provided in this Section 2. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into a customary underwriting agreement with the Underwriter's Representative
selected by the Company for such offering. The Holders shall have no right to
participate in the selection of the underwriters for an offering Pursuant to
this Section 2.
Marketing Limitation. In the event the
representative of the Company's underwriter or underwriters (the "Underwriters
Representative") advises the Company that market factors (including, without
limitation, the aggregate number of shares of Common Stock requested to be
registered, the general condition of the market, and the status of the persons
proposing to sell securities pursuant to the registration) require a limitation
of the number of shares to be underwritten, the Underwriter's Representative
may:
in the case of the Company's first public offering
of its Common Stock or other securities pursuant to a Registration Statement
declared effective with the Commission after the date of this Agreement (the
"IPO"), exclude some or all Registrable Securities from such registration and
underwriting; and
<PAGE>
in the case of any registered public offering
subsequent to the IPO, limit the number of shares of Registrable Securities to
be included in such registration and underwriting to a number, which taken
together with securities entitled to registration rights pursuant to the
Registration Rights Agreement between the Company and the Warrantholder dated
July 17, 1998 as to which the Holder gives notice of an election to have such
securities covered by the registration statement, is not less than twenty
percent (20%) of the total securities to be registered. In such event, the
Underwriter's Representative shall so advise all Holders and the number of
shares of Registrable Securities that may be included in the registration and
underwriting (if any) shall be allocated among all Holders of Registrable
Securities in proportion, as nearly as practicable, to each Holder's pro rata
amount of Registrable Securities held by such Holder at the time of filing of
the Registration Statement. The number of shares of Registrable Securities to be
included in such underwriting shall not be reduced unless all other securities
(including the securities subject to the Stockholders Agreement between Company
and R. Perry Harris and Karen Harris dated July 16 , 1998 but excluding those to
be sold by the Company) are excluded from the underwriting in proportion, as
nearly as practicable, to each holder's pro rata amount of the aggregate of
Registrable Securities and such other securities. No Registrable Securities or
other securities excluded from the underwriting by reason of this subsection
2.2(b) shall be included in such Registration Statement.
Withdrawal in Piggyback Registration. If any
Holder, or a holder of other securities entitled (upon request) to be included
in such registration, disapproves of the terms of any such underwriting, such
Holder may elect to withdraw therefrom by written notice to the Company and the
underwriter delivered at least seven (7) days prior to the effective date of the
Registration Statement. Any Registrable Securities or other securities excluded
or withdrawn from such underwriting shall be withdrawn from such registration.
Blue Sky in Piggyback Registration. In the event of
any registration of Registrable Securities pursuant to this Section 2, the
Company will exercise its best efforts to register and qualify the securities
covered by the Registration Statement under such other securities or blue sky
laws of such jurisdictions as the Holders shall reasonably request and as shall
be reasonably appropriate for the distribution of such securities; provided,
however, that the Company shall not be required to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with registrations pursuant to Section 2 shall be borne by the
Company. All Selling Expenses shall be borne by the Holders of the securities
registered pro rata on the basis of the number of shares registered.
REGISTRATION PROCEDURES. The Company will keep each Holder whose
Registrable Securities are included in any registration pursuant to this
Agreement advised as to the initiation and completion of such registration. At
its expense the Company will: (a) use its best efforts to keep such registration
effective for a period of ninety (90) days or until the Holder or Holders have
completed the distribution described in the Registration Statement relating
thereto, whichever first occurs; (b) furnish such number of prospectuses
(including preliminary prospectuses) and other documents as a Holder from time
to time may reasonably request; (c) prepare and file with the commission such
amendments and supplements to such Registration Statement and the prospectus
used in connection with such Registration Statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement; and (d) notify each
Holder of Registrable Securities covered by such Registration Statement at any
time when a prospectus relating thereto is required to be
<PAGE>
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing. If, at any time
after giving such written notice of its intention to register any of such
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register such securities, the Company may, at its election, give written
notice of such determination to each Holder of Registrable Securities that has
requested to register Registrable Securities and thereupon the Company shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration
Expenses in connection therewith to the extent provided in Section 3).
INFORMATION FURNISHED BY HOLDER. It shall be a condition
precedent of the Company's obligations to any Holder under this Agreement that
such Holder of Registrable Securities included in any registration furnish to
the Company such information regarding such Holder and the distribution proposed
by such Holder or Holders as the Company may reasonably request.
INDEMNIFICATION.
Company's Indemnification of Holders. To the extent
permitted by law, the Company will indemnify each Holder, each of its officers,
directors, employees and constituent partners, and each person controlling such
Holder, with respect to which registration, qualification or compliance of
Registrable Securities has been effected pursuant to this Agreement, and each
underwriter, if any, and each person who controls any underwriter against all
claims, losses, damages or liabilities (or actions in respect thereof) to the
extent such claims, losses, damages or liabilities arise out of or are based
upon any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus or other document (including any related
Registration Statement) incident to any such registration, qualification or
compliance, or are based on any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Company of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any state securities law, or any rule or regulation promulgated under
the Securities Act, the Exchange Act or any state securities law, applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance; and the
Company will reimburse each such Holder, each of its officers, directors,
employees and constituent partners, each such underwriter, and each person who
controls any such Holder or underwriter, for any legal and any other expenses
reasonably incurred, as incurred, in connection with investigating or defending
any such claim, loss, damage, liability or action; provided, however, that the
indemnity contained in this Section 6.1 shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or action if settlement is
effected without the consent of the Company (which consent shall not
unreasonably be withheld); and provided, further, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based upon any untrue statement or
omission based upon written information furnished to the Company by such Holder,
its officers, directors, employees, constituent partners, or legal counsel,
underwriter, or controlling person and stated to be for use in connection with
the offering of securities of the Company.
Indemnification Procedure. Promptly after receipt by an
indemnified party under this Section 6 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 6, notify the
<PAGE>
indemnifying party in writing of the commencement thereof and generally
summarize such action. The indemnifying party shall have the right to
participate in and to assume the defense of such claim, jointly with any other
indemnifying party similarly noticed; provided, however, that the indemnifying
party shall be entitled to select counsel for the defense of such claim with the
approval of any parties entitled to indemnification, which approval shall not be
unreasonably withheld; provided further, however, that if either party
reasonably determines that there may be a conflict between the position of the
Company and the Holders in conducting the defense of such action, suit or
proceeding by reason of recognized claims for indemnity under this Section 6,
then counsel for such party shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interest of such party. The failure to notify an indemnifying party promptly of
the commencement of any such action, if prejudicial to the ability of the
indemnifying party to defend such action, shall relieve such indemnifying party,
to the extent so prejudiced, of any liability to the indemnified party under
this Section 6, but the omission so to notify the indemnifying party will not
relieve such party of any liability that such party may have to any indemnified
party otherwise other than under this Section 6.
REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 under the Securities
Act ("Rule 144") and any other rule or regulation of the Commission that may at
any time permit a Holder to sell securities of the Company to the public without
registration, the Company shall:
make and keep public information available, as required by
Rule 144, at all times after ninety (90) days after the effective date of the
IPO;
file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
furnish to any Holder, so long as such Holder owns any
Convertible Securities or Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied
with the reporting requirements of Rule 144 (at any time
after ninety (90) days after the effective date of the
IPO), the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting
requirements); (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and
documents so filed by the Company; and (iii) such other
information as may be reasonably requested in availing any
Holder of any rule or regulation of the Commission which
permits the selling of any such securities without
registration.
TERMINATION OF REGISTRATION RIGHTS. The right to cause the
Company to register securities granted by the Company to the Holders under the
Agreement shall terminate as to each Holder on the earlier of (a) such time as
such Holder owns less than one percent (1%) of the outstanding stock of the
Company (assuming exercise of the Warrant) and is free to sell all of such stock
within a given three (3) month period to the public pursuant to Rule 144; or (b)
at such time as Holder is free to sell all of the stock issuable upon exercise
of the Warrant pursuant to Rule 144(k).
<PAGE>
TRANSFER OF RIGHTS. The registration rights of the Holders set
forth in this Agreement may be assigned by any Holder to a transferee or
assignee of any Convertible Securities or Registrable Securities not sold to the
public acquiring Convertible Securities or Registrable Securities equaling in
aggregate at least one percent (1%) of the Company's then outstanding equity
securities or all of the Convertible Securities and Registrable Securities held
by such Holder if transferred to a single entity; provided, however, that (a)
the Company must receive written notice prior to the time of said transfer,
stating the name and address of said transferee or assignee and identifying the
securities with respect to which such information and registration rights are
being assigned; and (b) the transferee or assignee of such rights must not be a
person deemed by the Board of Directors of the Company to be a competitor or
potential competitor of the Company. Notwithstanding the limitation set forth in
the foregoing sentence respecting the minimum number of shares that must be
transferred, any Holder may transfer such Holder's registration rights to (i)
any subsidiary, parent, general partner or limited partner of such Holder, or
any other person or entity directly or indirectly controlling, controlled by or
under common control with such Holder; or (ii) such Holder's family members by
will or intestacy in the case of individuals, without restriction as to the
number or percentage of shares acquired by any such entity or individuals.
MISCELLANEOUS.
Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth herein
or therein.
Successors And Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including permitted transferees of any shares of the Registrable Securities or
Convertible Securities). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New York.
Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall, be deemed an original, but all of which
together shall constitute one and the same instrument.
Titles And Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified by hand or
professional courier service, by telecopy or by facsimile, one (1) day after
deposit with Federal Express or other overnight delivery service, or two (2)
days after deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature pages hereof, or at such other
address as such party may designate by five (5) days' advance written notice to
the other parties.
<PAGE>
Amendments And Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance, either retroactively or prospectively,
and either for a specified period of time or indefinitely), with the written
consent of the Company and a majority in interest of the Holders. Any amendment
or waiver effected in accordance with this Section 10.7 shall be binding upon
each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities have been
converted), each future holder of all such securities and the Company. Upon the
effectuation of each such amendment or waiver, the Company shall promptly give
written notice thereof to the record holders of the Stock and such Common Stock
who have not previously consented thereto in writing.
Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
Separability. Any invalidity, illegality or limitation of
the enforceability with respect to any Holder of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Holder's domicile or otherwise, shall in no way affect or
impair the validity, legality or enforceability of this Agreement with respect
to other Holders. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, it shall to the extent practicable, be modified so as
to make it valid, legal and enforceable and to retain as nearly as practicable
the intent of the parties, and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the day and year first above written.
EQUIVEST FINANCE, INC.
By:
Name:
Chairman and CEO
WARRANTHOLDER:
CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC
BY:
MICHAEL C. SZWAJKOWSKI
VICE PRESIDENT
ELEVEN MADISON AVENUE
NEW YORK, NY 10010
Equivest Finance, Inc.
(1) Resort Funding, Inc.
BFICP Corporation
(2) Equivest Capital Funding, Inc.
(3) Eastern Resorts Corporation
Eastern Resorts Company, LLC
Long Wharf Marina Restaurant, Inc.
Syracuse, New York, August 28, 1998. Equivest Finance, Inc.
(NASD-EQUI) today announced that it had completed the previously announced
acquisition of Eastern Resorts Corporation of Newport, Rhode Island, one of the
largest developers of timeshare resorts in New England. As a result of the
acquisition, Eastern Resorts became a wholly-owned subsidiary of Equivest and
the outstanding common stock of Eastern Resorts was exchanged for $15 million
in cash and 3.2 million shares of common stock of Equivest. Equivest financed
the cash portion of the purchase price through a short-term bridge loan from
Credit Suisse First Boston Mortgage Capital LLC, which received a warrant
exercisable for 180,000 shares of the common stock of Equivest at a price of
$8.00 per share.
Eastern Resorts was founded by Mr. R. Perry Harris in 1981. It
developed, and continues to manage, six vacation resorts in Rhode Island and
Massachusetts, with a seventh resort currently in construction in Westen,
Massachusetts. Eastern Resorts sells and finances timeshare interests in
individual vacation units for the properties under its management. During
the seven month period ending July 31, 1998, Eastern Resorts had total revenues
of approximately $14,987,433 and pretax earnings of $2.3 million. Mr. Harris
will continue to serve as Chief Executive Officer of Eastern Resorts under a
long-term employment contract. He will also join the Board of Directors of
Equivest. The senior management team of Eastern Resorts has substantial
experience within the timeshare industry, and on average, significant
tenure with Eastern Resorts, which is expected to continue.
The acquisition of Eastern Resorts is expected to complement the
activities of Equivest's wholly-owned subsidiary Resort Funding, Inc., which
specializes in financing the development of destination resorts in the timeshare
industry, as well as the purchase of vacation ownership intervals bought by
consumers in timeshare resorts. Through Resort Funding, Equivest is actively
financing resorts throughout the United States and in selected foreign markets.
Equivest believes that the Eastern Resorts' acquisition enhances the Company's
comprehensive approach to serving both developers and consumers in the
vacation/leisure industry. It also provides Resort Funding a core base of
receivables financing volume. "This acquisition is a major step in broadening
Equivest's market and diversifying its revenue base. We are very pleased to have
completed the merger and look forward to building on the excellent record of
Eastern Resorts. We are particularly pleased to have joined forces with the
superb group of employees at Eastern Resorts" said Richard C. Breeden, Chairman
and Chief Executive Officer of Equivest.
Certain statements (including without limitation the statements
concerning the merger and the operation of the combined companies after the
consummation of the merger) contained in this press release are forward-looking.
These may be identified by the use of forward-looking words or phrases such as
"believe," "expect," "anticipate," "should," "planned," "estimated," and
"potential." These forward-looking statements are based on Equivest's current
expectations. The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for such forward-looking statements. In order to comply with the
terms of the safe harbor, Equivest notes that a variety of factors could cause
actual results and experience to differ materially from the anticipated results
or other expectations expressed in such forward-looking statements. Factors
affecting the plans and potential results and operations of Equivest and Eastern
Resorts as combined companies, as well as the risks and uncertainties that may
affect the operations, performance, development, and results of Equivest's and
Eastern Resorts' businesses, include the ability of the two companies to
successfully integrate their operations, a downturn in the real estate cycle or
other factors which result in lower sales of vacation ownership interests,
possible financial difficulties of one or more of the developers with whom
Equivest does business, such as the risk of carrying non-performing assets or
losses if defaulted loans prove to have insufficient collateral backing,
fluctuations in interest rates, prepayments by consumers of indebtedness,
prepayments by developers, inability of developers to honor replacement
obligations for defaulted consumer notes, and competition from organizations
with greater financial resources.
Contact: Ben Cesare of Cohn & Wolfe (212) 598-3651
